The Nigerian money market witnessed relative stability last week as rates stayed below 27%, largely supported by the significant liquidity boost within the financial system. Analysts attribute this to heavy inflows from matured Treasury bills, OMO instruments, and Remita funding.
Fresh data from AIICO Capital Limited revealed that banking sector liquidity closed at N2.085 trillion on Friday, marking a N446 billion increase from the previous week’s N1.639 trillion.
The week’s liquidity surge was driven by inflows of N184.75 billion from maturing Nigerian Treasury bills and N45.50 billion from expiring OMO instruments. Remita inflows further elevated system liquidity, counterbalancing the impact of CRR debits and FX settlement outflows.
Market watchers highlighted that the Central Bank of Nigeria (CBN) refrained from implementing liquidity-absorbing measures during the period. As a result, the system’s net long position strengthened to N1.95 trillion, up from N1.47 trillion in the prior week, according to Cordros Capital Limited.
Short-term rates reflected the buoyancy, with the open repo rate (OPR) holding steady at 26.50% while the overnight lending rate eased slightly to 26.96%. Activity in the Treasury bills market remained muted, with modest transactions on select maturities capped by limited offers.
Looking ahead, analysts warn that interest rates could climb if the CBN embarks on aggressive liquidity mop-ups through OMO auctions.
CBN to Resume OMO, Treasury Bills Auction
For the new trading week, all eyes are on the CBN as it prepares to issue fresh OMO instruments at the primary auction amidst maturing obligations. The market is set to receive N378 billion in inflows from expiring OMO and Treasury bills combined.
The apex bank has lined up Nigerian Treasury bills worth N290 billion for sale to investors at the primary market auction.
Interestingly, the CBN abstained from conducting OMO auctions last week despite heavy maturities, a move that sustained excess liquidity within the system. According to Cowry Asset Management, the week ahead will witness an additional N300 billion OMO repayment alongside N78 billion Treasury bill maturities, further boosting system liquidity.
