Average system liquidity in May dropped to N550.9 bn from N453.8 bn recorded in the previous month.

This decline was driven by outflows through the Standing Deposit Facility, which recorded N827.0 bn; Open Market Operation sales of N1.1 tn; and primary market sales of N1.5 tn. These outflows outweighed inflows from the Standing Lending Facility at N86.4bn, OMO maturities at N101.3bn, and primary market repayments of N61.6bn.

Despite the tighter liquidity conditions, the Open Repo Rate remained steady at 26.5 per cent, while the Overnight Rate improved by 12 basis points to close the month at 27.0 per cent.

During the month, the Central Bank of Nigeria conducted two rounds of Nigerian Treasury Bills and OMO auctions. In the NTB auctions, the apex bank offered N900.0 bn worth of instruments across 91-day, 182-day, and 364-day tenors.

The auction witnessed an oversubscription of N2.7tn, resulting in a bid-to-offer ratio of 1.0 times.

Mid-dated instruments attracted the most interest with a bid-to-offer ratio of 1.2 times, while short and long-dated notes each recorded 1.0 times. Eventually, the CBN allotted N1.2 tn cumulatively.

Similarly, the CBN conducted OMO auctions, withdrawing N1.1tn from the financial system to manage excess liquidity and enhance foreign exchange inflow. Notably, only long-dated instruments were subscribed to during both auction rounds.

In the secondary T-bills market, average yield rose by 105 basis points month-on-month to 21.5 per cent. Short- and mid-term instruments saw the most sell pressure, with yields rising by 181 basis points and 124 basis points to 19.5 per cent and 21.6 per cent, respectively. Long-term instruments also recorded mild selloffs, as yields edged up 10 basis points to 23.3 per cent.

Analysts expect bearish sentiment to persist in the secondary market, with yields likely to remain elevated due to ongoing fiscal funding pressures and tight system liquidity.

The PUNCH reported that liquidity in Nigeria’s banking system witnessed a recovery in February, surging to N572.8bn from an N307.5bn deficit recorded in January, according to a report by Afrinvest.