In a strategic move to mop up excess liquidity from the financial system, the Central Bank of Nigeria (CBN) conducted a sizable Open Market Operation (OMO) auction on Monday, which led to a notable uptick in short-term money market rates.
At the start of the trading week, the market was flush with liquidity exceeding ₦1.5 trillion, supported by anticipated inflows. In response, the CBN intervened with a ₦600 billion OMO bill offer, targeting the 113-day and 260-day tenors. This liquidity management initiative pushed the average money market rate to 26.5%, reflecting a deliberate policy stance aimed at tightening financial conditions.
The action signaled the CBN’s commitment to stabilizing short-term market dynamics. Analysts noted that the move was a pre-emptive strategy designed to curtail a potential liquidity glut and ensure equilibrium in the financial ecosystem.
According to trading data from FMDQ, the Open Repo Rate (OPR) edged up by 8 basis points to 26.58%, while the Overnight Rate (OVN) climbed 17 basis points to close at 27.17%. These adjustments reflect a moderate tightening in short-term liquidity.
AIICO Capital Limited, in its market commentary, projected that short-term rates would remain elevated in the absence of any major liquidity injections. The Nigerian Interbank Offered Rate (NIBOR) exhibited mixed movement, retreating across most maturities except the overnight tenor, which advanced by 8 basis points.
Meanwhile, activity in the Nigerian Treasury Bills (NITTY) market was subdued, with the yield curve slipping across most tenors. This trend contributed to a 3 basis point drop in average secondary market yields, settling at 20.20%. The modest bullish sentiment indicates investor preference for medium- and short-term instruments despite the overarching tightening stance.
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