Amidst ongoing fiscal obligations, Nigeria’s money market witnessed fluctuating rates this week as deposit money banks completed their corporate tax payments to the Federal Inland Revenue Service (FIRS), leading to notable cash outflows and liquidity adjustments in the financial ecosystem.
Despite the strain from these tax-related outflows, market liquidity remained relatively stable, bolstered by expectations of substantial capital inflows in July from maturing fixed income instruments.
In a market intelligence report, Erad Partners Limited projected that about ₦949.73 billion will flow into the system through matured Nigerian Treasury Bills (NTBs) and Federal Government bonds next month. The firm noted that in the absence of immediate funding pressure, short-term rates have stayed largely consistent.
The interbank segment of the financial market reflected ample liquidity on Wednesday, particularly as the Central Bank of Nigeria (CBN) opted not to proceed with a treasury bills auction, following its earlier Open Market Operation (OMO) offer worth ₦600 million at the start of the trading week.
Analysts at AIICO Capital Limited confirmed that the money market absorbed heavy liquidity outflows linked to corporate tax remittances by Nigerian banks. However, the volume of liquidity circulating in the system ensured these outflows did not exert undue strain on the market.
Consequently, money market rates showed minimal movement. The Overnight Policy Rate (OPR) remained anchored at 26.50%, while the Overnight (O/N) lending rate saw a marginal uptick of 4 basis points, closing at 27.00%. AIICO Capital’s analysts expect these rates to hover around current levels barring any unexpected liquidity shocks.
Meanwhile, the Nigerian Interbank Offered Rate (NIBOR) reflected a moderate increase across all tenors, indicating a subtle tightening in short-term liquidity conditions, according to a market update from Cowry Asset Management Limited.
On the Nigerian Treasury Bills Yield (NITTY) curve, performance was mixed across various tenors, showing uneven yield direction in both short- and medium-term instruments. Despite this divergence, the secondary market maintained a bullish tone. Analysts reported a dip in average yields by 20 basis points, bringing it to 19.85%.
Overall, while tax season exerted temporary pressure on market liquidity, sustained investor confidence and anticipated inflows in July are expected to reinforce stability in short-term money market rates.
