Nigeria’s money market experienced heightened volatility last week as the Nigerian Interbank Offered Rate (NIBOR) rose across tenors, following large-scale liquidity withdrawals triggered by the Central Bank of Nigeria’s (CBN) monetary operations.
The increase in benchmark interbank rates came amid aggressive Open Market Operations (OMO) by the apex bank, which auctioned and settled significant volumes of bills in a bid to manage liquidity fluctuations and roll over maturing securities.
During the period, the CBN auctioned substantial OMO instruments, allocating up to ₦2.64 trillion across standard tenors, primarily to settle expired securities. Despite these withdrawals, overall system liquidity improved to a net surplus of ₦2.78 trillion, representing a 31.94% week-on-week increase from the prior week’s ₦2.11 trillion, according to data from investment firms.
Liquidity inflows were supported by funds parked by deposit money banks at the CBN window, coupon payments from government bonds, and repayments from matured investment securities.
In a market update, Cowry Asset Limited attributed the liquidity improvement largely to the repayment of ₦2.2 trillion in Treasury bill maturities, which outweighed liquidity debits stemming from ₦1.06 trillion in Treasury bill auction sales. However, the firm noted that earlier OMO bill settlements totaling ₦1.3 trillion reduced available system liquidity at the start of the week.
Despite the headline surplus, Cowry Asset emphasized that cumulative liquidity withdrawals of nearly ₦4.0 trillion from two CBN auctions tightened interbank funding conditions, prompting an uptick in short-term borrowing costs.
The market recorded ₦2.07 trillion in placements at the CBN’s Standard Deposit Facility (SDF), which helped boost liquidity alongside ₦66.50 billion in primary market repayments. These excess liquidity conditions kept the overnight rate at 22.71% early in the week.
By Tuesday, system liquidity improved further to ₦3.77 trillion, supported by a ₦1.31 trillion inflow from a 20-Jan-26 OMO maturity, despite ₦108.00 billion borrowed from the CBN’s Standard Lending Facility (SLF).
However, according to AIICO Capital Limited, the liquidity position reversed by mid-week, slipping into deficit territory due to a sizable ₦2.64 trillion OMO settlement. This pressure was partially offset by a ₦91.34 billion coupon inflow from the January 2042 FGN bond.
Reflecting these dynamics, NIBOR rose across all maturities. The overnight NIBOR increased by 2 basis points to 22.84% by the end of the week, while the 1-month, 3-month, and 6-month tenors also recorded increases.
On Friday, liquidity opened strong at ₦2.78 trillion, driven by ₦2.66 trillion in DMB placements at the CBN SDF window and a ₦29.82 billion coupon payment from the July 2030 bond. Overall, system liquidity improved by ₦673.74 billion week-on-week, even as the average funding cost rose by 5bps to 22.65%.
The Open Repo Rate (OPR) remained unchanged at 22.50%, while the overnight rate climbed by 10bps to 22.79%. Market participants anticipate further liquidity inflows of ₦500.00 billion from the 27-Jan-26 OMO maturity, alongside ₦41.62 billion from FGN bond coupon payments, which could cushion system liquidity despite expected outflows from an upcoming FGN bond auction.
Yields on Nigerian Treasury Bills (NITTY) were broadly higher across the curve. While the 1-month NITTY yield declined by 6bps to 16.64%, the 3-month, 6-month, and 12-month tenors edged higher, reflecting investor repositioning following the outcome of the mid-week primary auction.
Secondary market trading remained bearish, with selective sell-offs pushing the average secondary market yield up by 37bps to 18.50%.
At Wednesday’s NTB primary auction, the CBN offered ₦1.15 trillion, attracting total subscriptions of ₦3.4 trillion, with nearly 98% of bids concentrated in the 364-day tenor. Final allotments totaled ₦1.1 trillion, translating to a bid-to-cover ratio of 3.24x and a sales-to-offer ratio of 0.92x. Stop rates on the 91-day and 182-day bills rose to 15.84% and 15.65%, respectively, while the 364-day stop rate eased slightly to 18.36%.
Earlier in the week, the CBN’s OMO auction saw strong demand, with ₦600 billion offered across 203-day and 245-day maturities. Subscriptions reached ₦2.9 trillion, resulting in a ₦2.6 trillion allotment, with stop rates of 19.38% and 19.39%, respectively.
Looking ahead, Cowry Asset Limited expects money market rates to trend modestly lower, supported by a positive liquidity outlook driven by an estimated ₦900 billion in OMO maturities and anticipated December FAAC inflows. However, planned FGN bond auctions with repayments exceeding ₦900 billion could partially offset these inflows, keeping funding costs elevated relative to recent averages.
 rose across tenors, following large-scale liquidity withdrawals triggered by the Central Bank of Nigeria’s (CBN) monetary operations.){kind=link}