CBN Tightening Keeps Rates, Yields on Edge

• s System Liquidity Stays Elevated

Nigeria’s money market opened last week on a strong footing, with system liquidity around N5.0 trillion, supporting a moderation in interbank rates.

However, conditions tightened gradually, with liquidity closing lower at N3.84 trillion from N5.41 trillion the previous week.

Despite this decline, excess liquidity remained relatively robust, sustaining active market participation.

Investor behaviour continues to show a cautious and strategic tilt, with a clear preference for very short and longer tenors, while the mid-curve remains less attractive.

Interbank indicators reflected this tightening bias showed that NIBOR rose across all tenors, with the overnight rate increasing by 7bps to 22.39%, largely driven by liquidity pressures following the N2.17 trillion OMO debit earlier in the week.

Other tenors also trended higher, with the 1-month, 3-month, and 6- month NIBOR settling at 22.99%, 23.69%, and 24.19%, respectively.

Funding rates were mixed, as the OPR held steady while the overnight rate declined by 19bps to 22.16%, suggesting some easing in short-term funding pressures.

Across the fixed income curve, the NITTY showed mixed movements.

Shorter tenors (1-month and 3-month) edged higher by 4bps and 14bps to 16.08% and 16.27%, respectively, while longer tenors (6-month and 12-month) declined by 5bps and 11bps to 17.10% and 18.85%.

The March inflation print of 15.38% slightly above expectations introduced mild sell pressure, influencing investor sentiment.

In the Treasury bills secondary market, activity remained relatively subdued, although there was selective buying across the curve.

This supported a marginal decline in average yields by 6bps to 17.44%, with mild compression observed at the short end.

The OMO auction conducted on April 14 reinforced the Central Bank’s liquidity management stance.

While N600 billion was offered across three tenors, total subscriptions surged to N2.58 trillion, reflecting strong system liquidity.

Demand was heavily skewed toward the 140-day bill, which attracted N1.71 trillion (over 8x subscription) and was fully allotted at 19.91%, indicating investor preference to lock in yields at the longer end.

The 7-day bill also recorded strong demand, with N857 billion subscribed and N457 billion allotted at 21.90%, highlighting short-term liquidity parking. In contrast, the 63-day tenor saw weak interest, underscoring continued investor reluctance toward mid-curve exposures.