Money Market Liquidity Surges To N6.02trn On OMO Maturities

Nigeria’s money market recorded a significant liquidity boost last week as system liquidity surged to N6.02 trillion, driven largely by substantial Open Market Operations (OMO) maturities and continued placements at the Central Bank of Nigeria’s (CBN) Standing Deposit Facility (SDF).

The market opened the three-business-day trading week with liquidity at N3.84 trillion on Monday, recovering from the previous week’s post-OMO auction level of N2.79 trillion. Liquidity conditions improved steadily throughout the week as banks faced limited funding pressures and maintained low interbank borrowing activity.

Market analysts attributed the sharp increase in liquidity to the inflow of N1.97 trillion from maturing OMO instruments on Tuesday. The inflow pushed system liquidity to N5.92 trillion before closing the week at N6.02 trillion, reinforcing already comfortable funding conditions across the banking sector.

Despite the substantial cash injection, interbank rates remained largely unchanged, reflecting the abundance of funds in the financial system. The Open Repo (OPR) rate closed flat at 22.00 per cent, while the overnight lending rate remained steady at 22.19 per cent throughout the week.

Further evidence of improved liquidity conditions emerged across the Nigerian Interbank Offered Rate (NIBOR) curve. While the overnight NIBOR held steady at 22.25 per cent, the one-month tenor declined by 17 basis points to 22.65 per cent. The three-month and six-month tenors also eased by 70 basis points and 88 basis points respectively to settle at 22.97 per cent and 23.28 per cent.

The Treasury bills market also reflected the impact of the liquidity surge as investors increased demand for fixed-income securities. The Nigerian Treasury Bill True Yield (NITTY) curve traded mixed, with yields on shorter-dated instruments edging higher while longer-dated securities recorded marginal declines.

As a result, yields on one-month and three-month Treasury bills rose by 24 basis points and 16 basis points to 16.04 per cent and 16.53 per cent respectively. However, six-month and 12-month tenors declined by 13 basis points and eight basis points to close at 17.19 per cent and 18.85 per cent.

Trading in the secondary Treasury bills market remained moderately active despite the shortened week. Investor sentiment stayed bullish, supported by the elevated liquidity environment, leading to a six-basis-point decline in average benchmark yields week-on-week to 17.51 per cent.

The CBN’s OMO auction conducted on May 29 further underscored strong investor demand for short-term government securities. The 102-day tenor attracted subscriptions worth N1.73 trillion against an offer size of N200 billion, with the apex bank allotting N1.72 trillion at a stop rate of 20.37 per cent.

Similarly, the 11-day tenor recorded subscriptions of N225 billion, while the CBN allotted N220 billion at a stop rate of 21.80 per cent. The strong demand reflected investors’ preference for shorter-duration instruments amid uncertainty over the future direction of interest rates and liquidity conditions.

In contrast, the 39-day tenor attracted N588 billion in subscriptions but recorded no allotment, suggesting that the apex bank rejected bids considered inconsistent with its pricing objectives and efforts to manage yield expectations.

Looking ahead, analysts at Cowry Assets Management expect liquidity conditions to remain robust as the market enters a new month with additional maturity inflows. The firm projects inflows of about N2.72 trillion from OMO maturities and N631.46 billion from maturing Nigerian Treasury Bills, bringing total expected inflows to approximately N3.35 trillion.

According to the analysts, the anticipated inflows are expected to significantly outweigh the planned N700 billion Treasury bills auction scheduled for Wednesday, a development likely to sustain bullish sentiment in the fixed-income market and keep liquidity levels elevated in the near term.