Nigeria’s money market is poised for another week of abundant liquidity, as inflows from multiple debt maturities and coupon payments are expected to inject fresh cash of about N751.22 billion into the financial system.
This build-up will swell an already buoyant net long position of N2.36 trillion, setting the stage for steep crash in short-term funding rates. System liquidity has remained firmly in surplus territory.
The market opened last week with balances of roughly N2.11 trillion, further bolstered by N204.87 billion in Open Market Operation (OMO) maturities.
This glut ensured that the overnight (OVN) rate held steady at 27.0 per cent, while the overall net long position climbed from N1.94 trillion in the prior week to N2.36 trillion. Market watchers believe the week will test the Central Bank of Nigeria’s (CBN) liquidity management resolve.
Unless the apex bank aggressively sterilises cash through OMO auctions or other tightening measures, interbank rates are expected to ease further Analysts at Cowry Assets noted that “anticipated maturities worth about N1.0 trillion, comprising OMO and treasury bills, should keep the market awash with cash and drive short-term rates lower.”
The composition of the week’s inflows underscores the scale of support. A hefty N294.98 billion is expected from Federal Government bond coupon payments, while OMO maturities of N254.90 billion and Nigerian Treasury Bill (NTB) maturities of N201.34 billion are also lined up.
Together, these payments will reinforce an already liquid system, sustaining the slide in borrowing costs at the very short end of the curve. The liquidity windfall has already left its imprint on the fixed-income market. Treasury bills rallied last week, with average yields compressing by 158 basis points week-on-week to 20.2 per cent.
OMO yields fell sharply by 280bps to 22.0 per cent, while NTB yields eased 30bps to 18.5 per cent. The bullish tone was amplified by strong demand spillover from unmet bids at the primary auction and a softer-than-expected inflation print for August, which stoked bets on a more dovish Monetary Policy Committee (MPC) stance.
Demand was particularly evident at the NTB auction, where subscription hit N1.59 trillion against just N290 billion on offer, producing a bid-to-offer ratio of 5.5x.
The Debt Management Office eventually allotted N345.10 billion at stop rates that fell across all maturities, further validating expectations of yield compression.
