N10trn maturities to Boost June Liquidity

Nigeria’s financial system is set to witness strong liquidity conditions in June as inflows estimated at N10,9 trillion are expected to hit the market driven largely by Open Market Operations (OMO) maturities.

According to the Financial Market Dealers Association (FMDA) May monthly report, the projected inflows for June represent a 3.51 per cent increase compared to May levels of N10.53 trillion, with OMO maturities expected to account for about 71 per cent of the total inflows.

The data showed that N7.77 trillion in maturing OMO is expected this month, higher than N7.17 trillion that matured in the month of May. An estimated inflow of N1.8 trillion is also expected rom Federal Accounts Allocation Committee (FAAC).

Treasury Bills maturities is however expected to drop to N995.81 billion this month compared to N1.05 trillion that matured in May. Maturing FGN Bond coupons is expected to bring in an inflow of N278.99 billion compared to N346.14 billion recorded in May.

A total of N49.04 billion inflow from maturing corporate bonds is expected compared to N95.09 billion that matured in May, while N10.46 billion in maturing commercial papers is expected this month as against N59.5 billion that matured last month.

The FMDA report noted, however, that the eventual liquidity impact could be moderated by further liquidity sterilisation measures from the Central Bank of Nigeria (CBN). The development comes after average system liquidity rose by 7.76 per cent in May to N5.22 trillion despite the apex bank withdrawing an estimated N12.06 trillion through liquidity management operations during the period.

The Financial Markets Dealers Association (FMDA) noted that elevated liquidity conditions are expected to continue supporting investments in fixed income securities, even as rising global bond yields may sustain investor appetite for attractive domestic instruments.

According to the association, higher crude oil prices alongside improving external reserves are also expected to strengthen macroeconomic stability in the near term. FMDA noted that strong liquidity conditions within the financial system should help contain funding pressures, while large Open Market Operations (OMO) maturities due in June are likely to further boost system liquidity and support funding availability across the market.

The association, however, cautioned that foreign exchange pressures remain an important risk despite recent improvements in reserve levels. It advised investors to position their portfolios to benefit from elevated liquidity conditions and sizeable inflows expected in June, while maintaining prudent foreign exchange risk management strategies.

In the foreign exchange segment, the naira depreciated marginally in the Nigerian Foreign Exchange Market (NFEM) during the month despite an improvement in total foreing exchange turnover, which exceeded $8 billion.

The report attributed the forex market activity partly to improved market participation and increased dollar transactions during the review period. Meanwhile, global crude oil prices remained elevated on average in May at $102.40 per barrel, although recent optimism surrounding possible peace negotiations in major conflict regions has pushed prices below the $100 per barrel threshold in recent days.