Nigeria’s money market witnessed a major liquidity lift last week, driven by the maturity of open market operations (OMO) bills and Nigerian treasury bills (NTBs) worth a combined N480.66 billion.
The market opened on a strong footing, buoyed by a system liquidity balance of N5.12 trillion.
However, this surplus gradually narrowed as the Central Bank of Nigeria (CBN) moved swiftly to implement aggressive liquidity management strategies.
To mop up the excess cash in circulation, the CBN conducted a series of OMO auctions early in the week, followed by treasury bill sales.
These measures saw the system liquidity dip significantly, closing the week at N3.39 trillion. Additional debits totalling N55.24 billion and primary market repayments of N154.75 million further contributed to the liquidity drawdown.
Despite the contraction, short-term interest rates remained relatively stable. The overnight Nigerian Interbank Offered Rate (NIBOR) eased slightly, falling by two basis points to 24.86 per cent on a week-on-week basis.
The one-month and three-month tenors each declined by one basis point, while the six-month tenor recorded a steeper drop of 18 basis points. Interbank rates held steady, with the overnight rate inching up to 24.97 per cent and the funding rate flatlining at 24.5 per cent.
Bullish sentiment persisted in the secondary Treasury bills market, driven by continued naira stability and improved investor confidence. Repositioning across short- and mid-tenor instruments pushed average yields down by 55 basis points to settle at 17.4 per cent.
At the CBN’s OMO auction, demand far outstripped supply, reflecting the depth of liquidity in the market. While the apex bank offered N600 billion in bills, investors submitted bids worth N4.4 trillion.
Ultimately, N3.0 trillion was allotted. The stop rates were relatively unchanged, clearing at 19.45 per cent for the 168-day bill and 19.49 per cent for the 196-day bill, signalling the CBN’s commitment to sterilising liquidity without triggering a sharp rate adjustment.
Similarly, the NTB auction held on October 8 recorded overwhelming interest, particularly at the longer end of the curve. The Debt Management Office (DMO) offered N570 billion worth of NTBs, but subscriptions surged to N1.06 trillion.
The 364-day instrument was the most sought after, drawing bids of N986.33 billion and clearing at a stop rate of 15.77 per cent, slightly lower than the previous auction. Shorter-dated instruments attracted less attention, with the 91-day and 182-day papers clearing at 15.00 per cent and 15.25 per cent respectively.
Analysts pointed out that the strong investor interest in longer-dated securities reflects growing confidence in macroeconomic stability and expectations of further monetary easing. With naira exchange rates showing signs of firmness and inflationary pressures gradually moderating, market participants are increasingly tilting towards medium- to long-term fixed-income instruments for better real returns.
Looking ahead, market watchers expect liquidity to remain elevated in the coming week, supported by a N300 billion OMO maturity and ongoing bank activity at the CBN’s Standing Deposit Facility (SDF). Nonetheless, the CBN is likely to maintain its liquidity-tightening posture to strike a balance between market stability and inflation control.
As the quarter progresses, the fixed-income space is gradually regaining momentum, marked by cautious optimism and a reawakening of investor appetite. The combination of excess liquidity, steady yields, and a stable macro environment may continue to define market dynamics in the weeks ahead.
Analysts at Cowry Asset Management Limited expect liquidity levels in the coming week to remain robust, supported by continued activity at the CBN’s Standing Deposit Facility (SDF) window and the anticipated N300 billion OMO maturity.
They noted that the market has continued to reflect a delicate balance between liquidity management and yield positioning.
With naira stability and a gradual dovish shift in monetary policy, investors are increasingly leaning toward medium- to long-term instruments in search of higher real returns, an indication that confidence is gradually returning to the fixed-income space.
