CBN Sterilisation Efforts Persist with System Liquidity Remaining Strong N4.66trn

In the face of the Central Bank of Nigeria (CBN) sterilisation effort, liquidity in the Nigerian financial system remained firmly in surplus last week, with net system liquidity rising to N4.66 trillion from N3.61 trillion in the previous week.

Of the surplus, approximately N4.4 trillion was placed at the Standing Deposit Facility (SDF), while N2.3 trillion in the primary market repayments provided additional support to system liquidity

However, the N2.9 trillion OMO settlement is expected to exert downward pressure on system liquidity in the near term, as the CBN continues to intensify its sterilisation efforts.

Money-market rates remained relatively stable, with the overnight rate decreasing marginally by 13bps to 22.13%, while the funding rate was unchanged at 22.00%.

Meanwhile, NIBOR rates moved higher across the curve, reflecting expectations of tighter liquidity conditions. The 1-month, 3-month, and 6-month rates increased by 26bps, 56bps, and 76bps, respectively, while the overnight rate rose by just 2 bps.

Activity in the secondary Treasury bills market remained subdued during the week, with yields broadly unchanged across the curve.

Consequently, the average NTB yield remained stable due to buy sentiments across all end of the curve, respectively. Thus, yield closed at 18.86% from 18.95% prior week.

At the NTB auction this week, the CBN offered N750 billion across the 91-day, 182- day, & and 364-day maturities, attracting total subscriptions of N3.4 trillion.

The CBN ultimately allotted N865.7 billion, reflecting strong investor demand. Stop rates for the 91-day and 182-day bills remained unchanged at 16.30% and 16.50%, respectively, while the 364- day stop rate declined by 31bps to 16.84%.

The decline in the longest tenor suggests continued investor preference for locking in relatively attractive yields at the longer end of the NTB curve.