- Yet Rates Ease on Mixed Inflows
Last week’s money market opened on a notably liquid footing, with system liquidity elevated at N4.68tn, largely supported by strong placements at the Standing Deposit Facility.
However, this ample liquidity proved short-lived. Conditions tightened sharply midweek following aggressive sterilization through OMO auctions, underscoring the authorities’ resolve to rein in excess liquidity.
By the close of the week, system liquidity had moderated to N2.16tn, reflecting growing pressure compared with N4.32tn in the prior week.
Liquidity conditions were further shaped by expectations of additional debits, particularly the N1.91tn raised at the NTB auction, set against N765.9bn in NTB maturities and N550bn in OMO maturities. This net effect signalled a deliberate tightening bias by the Central Bank of Nigeria, aimed at sustaining firm funding conditions.
Interestingly, despite the tighter liquidity backdrop, money market rates softened. The overnight rate declined by 7bps week on-week to 22.71%, while the funding rate remained flat at 22.50%.
NIBOR rates also trended lower across the curve, reflecting mixed market activity and intermittent inflows.
Overnight NIBOR eased by 2bps to 22.79%, while the 1-month, 3-month and 6-month tenors declined by 7bps, 10bps and 25bps to 23.42%, 24.12% and 24.79%, respectively.
Consequently, NITTY yields declined across all maturities, with the 1-month, 3-month, 6-month and 12-month tenors shedding 24bps, 25bps, 15bps and 38bps, respectively.
In the treasury bills space, secondary market activity was relatively subdued as investors focused attention on the primary NTB auction, encouraged by the deceleration in January 2026 headline inflation.
Similarly, the secondary NTB market saw a bullish tone, as unmet auction demand spilled into the market, driving a 13bps week-on-week decline in the average yield to 17.45%.
At the primary auction, N1.15tn was offered across standard tenors but demand surged to N4.3tn, resulting in a bid-to-offer ratio of 2.24x and total allotment of N1.91tn.
While the 182-day stop rate held at 16.65%, the 91-day and 364-day bills cleared lower at 15.80% and 15.90%, reflecting declines of 4bps and 109bps, respectively. Secondary market trading remained muted around the auction, although the 04 Feb 27 bill rallied by 21bps, helping compress the average yield marginally.
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