The Central Bank of Nigeria (CBN) launched one of its most forceful liquidity sterilisation drives in recent months, absorbing N1.19 trillion through Open Market Operations (OMO) last week.
Yet, despite the scale of the mop-up, system liquidity remained buoyant, closing the week with an extraordinary net long position of N1.52 trillion compared with N159.40 billion in the previous week. The overnight (OVN) rate moderated slightly, down 5 basis points week-on-week to 27.0 per cent, underscoring the paradox of abundant liquidity coexisting with elevated short-term rates.
The system had been bolstered by N758.00 billion in OMO maturities alongside fresh inflows from the Federation Accounts Allocation Committee (FAAC). However, the CBN’s dual OMO auctions during the week successfully sterilised a significant share of these inflows, anchoring short-term market dynamics.
The persistence of surplus liquidity was evident in placements at the CBN’s Standing Deposit Facility (SDF). Weekly averages climbed to N1.20 trillion—almost triple the N419.77 billion of the prior week—as banks sought safe outlets for excess cash. Analysts note that unless the apex bank intensifies its mop-up activity, fresh OMO maturities of N459.60 billion due this week could further swell liquidity, exerting downward pressure on overnight rates.
In the Treasury bills market, trading was bearish as investors positioned ahead of next week’s Primary Market Auction (PMA). Average yields rose 23bps week-onweek to 22.2 per cent, with the Nigerian Treasury Bills (NTB) segment leading the move, climbing 50bps to 18.9 per cent. Yields in the OMO segment eased marginally by 3bps to 25.5 per cent. As part of its tightening, the CBN offered N700.00 billion across the 83-day and 84-day maturities.
Demand was overwhelming, with subscriptions amounting to N1.57 trillion (bid-to-offer: 2.2x). Eventually, N1.19 trillion was allotted at elevated stop rates of 26.49 per cent and 26.50 per cent, underscoring the Bank’s commitment to sustaining high yields that attract foreign portfolio inflows. The Federal Government bond market also traded under pressure. Average yields rose 40bps week-on-week to 17.1 per cent, with the selloff concentrated in the midcurve where yields spiked 63bps.
Heavy selling of the FEB-2028, JUL-2034, and MAR-2036 bonds saw their yields jump 114bps, 165bps, and 107bps respectively. At its August auction, the Debt Management Office (DMO) re-opened the JUN2032 bond and introduced a new AUG-2030 issuance, offering N200.00 billion. Subscriptions reached N268.17 billion (bid-to-offer: 1.3x), but the DMO underallotted N136.16 billion and held stop rates at 17.95 per cent and 18.00 per cent, consistent with its tight pricing stance.
On the foreign exchange front, the naira weakened 0.9 per cent week-on-week to N1,534.00/$ amid sustained demand pressures, despite $170 million CBN interventions and continued portfolio inflows.
Gross reserves, however, extended their rally for the eighth straight week, adding $161.06 million to reach $41.27 billion. Forward contracts strengthened across all tenors, signalling confidence in the medium-term outlook.
