Nigeria’s money market witnessed a major increase in liquidity last week, with available funds in the banking system rising to N6.02 trillion. The growth was largely driven by the maturity of Open Market Operations (OMO) instruments and continuous deposits by banks through the Central Bank of Nigeria’s (CBN) Standing Deposit Facility (SDF).
The trading week, which lasted for three business days, began with liquidity standing at N3.84 trillion on Monday. This represented a recovery from the previous week when liquidity had dropped to N2.79 trillion following an OMO auction.
Market conditions improved steadily during the week as banks faced little pressure to source funds. With enough cash available in the system, financial institutions had limited need to borrow from one another, helping to maintain stability across the money market.
Analysts explained that the biggest boost came on Tuesday when OMO instruments worth N1.97 trillion matured and returned funds to investors. This significant inflow pushed system liquidity to N5.92 trillion before it eventually closed the week at N6.02 trillion.
Despite the large amount of money entering the financial system, key interbank lending rates remained largely unchanged. The Open Repo Rate (OPR) stayed at 22.00 percent, while the overnight lending rate remained stable at 22.19 percent throughout the week. This reflected the comfortable liquidity conditions available to banks.
The Nigerian Interbank Offered Rate (NIBOR), which measures borrowing costs among banks, also showed signs of easing. While the overnight NIBOR remained unchanged at 22.25 percent, longer-term rates declined. The one-month tenor fell by 17 basis points to 22.65 percent, while the three-month and six-month tenors dropped to 22.97 percent and 23.28 percent respectively.
The improved liquidity environment also influenced activity in the Treasury bills market. Investors, encouraged by the abundance of funds, increased demand for government-backed securities.
Yields on short-term Treasury bills moved slightly higher. The one-month bill yield rose to 16.04 percent, while the three-month yield increased to 16.53 percent. However, longer-dated instruments recorded lower yields, with six-month and 12-month Treasury bills falling to 17.19 percent and 18.85 percent respectively.
Trading in the secondary Treasury bills market remained active despite the shortened trading week. Strong investor demand helped drive average benchmark yields down by six basis points to 17.51 percent, indicating continued confidence in fixed-income investments.
The CBN’s OMO auction held on May 29 further highlighted investors’ appetite for short-term government securities. The 102-day OMO bill attracted subscriptions totaling N1.73 trillion against an offer of N200 billion. The apex bank eventually allotted N1.72 trillion at a stop rate of 20.37 percent.
Similarly, the 11-day OMO instrument recorded subscriptions worth N225 billion, with N220 billion allotted at a stop rate of 21.80 percent. However, although the 39-day tenor attracted N588 billion in subscriptions, the CBN chose not to allot any funds under that category, likely due to pricing considerations.
Looking ahead, analysts at Cowry Assets Management expect liquidity levels to remain strong. They forecast additional inflows of about N3.35 trillion in the coming weeks, including N2.72 trillion from maturing OMO instruments and N631.46 billion from Treasury bill maturities.
With these expected inflows significantly higher than the planned N700 billion Treasury bills auction, market experts believe liquidity will remain elevated, supporting investor confidence and sustaining positive sentiment in Nigeria’s fixed-income market.
