By BizWatch Nigeria
Key Points
- Banking system liquidity remained strong at over N6.2 trillion
- Short-term money market rates traded largely flat amid excess liquidity
- CBN offered N700 billion across Treasury bills tenors at midweek auction
- Investors maintained strong appetite for long-dated government securities
- Treasury bills secondary market yields declined across key maturities
Main Story
Nigeria’s money market rates remained largely stable on Wednesday as excess liquidity in the financial system continued to support funding conditions across the banking sector.
Market data showed that liquidity in the banking system hovered above ₦6.2 trillion, enabling deposit money banks to continue parking significant funds at the Central Bank of Nigeria’s (CBN) Standing Deposit Facility (SDF) window.
According to AIICO Capital Limited, system liquidity closed at approximately ₦6.62 trillion ahead of the settlement of the latest Treasury bills auction, reflecting a marginal increase of ₦8.56 billion compared to the previous trading session.
The liquidity surplus was primarily driven by ₦6.19 trillion in placements by Deposit Money Banks at the CBN’s deposit window, amid relatively muted primary market activities.
The development helped maintain stability in short-term benchmark rates despite the CBN’s Treasury bills auction conducted during the session.
At the auction, the apex bank offered ₦700 billion across the standard 91-day, 182-day, and 364-day maturities.
Interbank funding rates closed on a mixed note. Data from Cowry Asset Management showed the Overnight Nigerian Interbank Offered Rate eased marginally by 2 basis points to 22.27%, supported by strong liquidity conditions in the market.
Similarly, the Open Repo (OPR) rate remained unchanged at 22.00%, while the Overnight lending rate edged slightly higher by 4 basis points to 22.17%.
AIICO Capital also noted that the Nigerian Overnight Financing Rate (NOFR) held steady at 22.00%.
Market analysts expect liquidity levels to moderate slightly following the settlement of Treasury bills sold at the primary market auction, which is projected to trigger an outflow of about ₦731.75 billion from the banking system.
In the secondary Treasury bills market, investor demand remained robust, pushing yields lower across several maturities.
Yields on 1-month, 2-month, 3-month, and 6-month instruments declined by 37 basis points, 4 basis points, 7 basis points, and 8 basis points respectively.
Consequently, the average Treasury bills yield declined marginally by 1 basis point to settle at 17.47%, reflecting sustained investor appetite for fixed-income securities amid improving macroeconomic sentiment.
What’s Being Said
Analysts said the persistent liquidity surplus in the banking system continues to suppress short-term rates despite the CBN’s ongoing liquidity management operations.
The strong demand recorded at the Treasury bills auction also highlights growing investor confidence in government securities, particularly long-tenor instruments offering relatively attractive real returns.
What’s Next
Market participants are expected to closely monitor liquidity movements following the settlement of Treasury bills auctions and possible further CBN interventions in the money market.
Analysts also anticipate that demand for fixed-income instruments could remain elevated as investors continue to position defensively amid inflationary pressures and uncertainty in the broader macroeconomic environment.
