Liquidity conditions in Nigeria’s money market strengthened during the week, reversing earlier pressure that had pushed system balances into deficit territory following settlement of Open Market Operations (OMO) bills.
Market liquidity had initially tightened after midweek OMO maturities drained funds from the system, creating a short-lived deficit. However, conditions improved markedly as inflows from matured government securities entered the financial system, restoring surplus balances.
By Thursday, system liquidity rebounded to a surplus position of approximately ₦2.58 trillion, representing a significant recovery from the previous day’s shortfall. Market analysts attributed the turnaround to sizeable inflows from both bond and Nigerian Treasury Bill (NTB) maturities.
According to a market note released by AIICO Capital Limited, the most significant contributor was the ₦1.27 trillion inflow from the Federal Government bond that matured on January 22, 2026. This was complemented by an additional ₦725.19 billion injected into the system from matured Treasury bills.
Liquidity conditions were further bolstered by heavy placements at the Central Bank of Nigeria’s Standing Deposit Facility (SDF), where financial institutions parked an estimated ₦1.4 trillion. These placements reflected improved cash availability across the banking system and helped stabilise short-term funding conditions.
Despite the positive inflows, liquidity expansion was partially offset by the settlement of ₦1.06 trillion worth of Nigerian Treasury bills from the midweek primary market auction conducted by the apex bank. The settlement absorbed a portion of the surplus funds but was insufficient to reverse the broader liquidity improvement.
As a result, short-term funding rates softened modestly. The average cost of funds declined by 2 basis points to 22.63 percent. The Open Repo Rate (OPR) remained unchanged at 22.50 percent, while the Overnight Rate (OVN) eased by 5 basis points to close at 22.75 percent.
Market participants expect funding rates to remain largely range-bound in the near term, barring any unexpected liquidity injections or withdrawals by the Central Bank.
In the Treasury bills secondary market, yields trended lower across most maturities, supported by the significant NTB maturity inflows recorded on Thursday. Yields on the one-month, three-month, six-month, and twelve-month instruments declined by 60 basis points, 36 basis points, 17 basis points, and 2 basis points respectively.
However, despite the decline across individual tenors, the overall average yield on Treasury bills increased by 28 basis points to 18.43 percent. Analysts interpret this divergence as a sign of weakening investor sentiment and a less accommodative trading environment in the secondary market, driven by cautious positioning amid evolving monetary conditions.
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