Liquidity Surges in Nigerian Money Market as Banks Tap into Funds
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Liquidity in Nigeria’s money market soared by 62.3 per cent to ₦2.2tn last week, driven by a 76.4 per cent increase in banks’ access to funds, according to a report by Afrinvest.
Despite the liquidity boost, the open repo rate remained steady at 32.4 per cent, while the overnight rate dipped marginally by 10 basis points to 32.9 per cent.
Weakening Demand for Treasury Bills
Afrinvest noted that at the latest treasury bill auction, the Central Bank of Nigeria (CBN) offered ₦800bn worth of instruments across three tenors – 91-day, 182-day, and 364-day. However, investor appetite weakened, with the bid-to-offer ratio declining to 1.1 times, compared to 2.3 times in the previous auction.
The 364-day instrument remained the most attractive to investors, posting a bid-to-cover ratio of 1.9 times, while the 91-day and 182-day bills recorded 1.0 times and 1.1 times, respectively.
Meanwhile, stop rates for all maturities adjusted upwards:
91-day bills rose by 100 basis points to 18.0 per cent
182-day bills climbed 70 basis points to 18.5 per cent
364-day bills saw the highest increase, up 150 basis points to 19.9 per cent
Rebound in Secondary Market Sentiment
The previous week’s bearish sentiment in the secondary market reversed, as average yields across all tenors declined by 40 basis points week-on-week, settling at 19.4 per cent.
Investor interest was particularly strong in mid- and long-term treasury bills, where yields fell by 16 basis points and nine basis points, closing at 19.0 per cent and 21.6 per cent, respectively.
However, short-dated instruments faced selling pressure, pushing their average yield up by 13 basis points to 17.6 per cent.
Outlook: Maturity Flows and New Issuance to Shape Market Sentiment
Afrinvest projected that market activity in the coming week would be driven by a ₦1.2tn treasury bill maturity, alongside the issuance of ₦700bn in new primary market instruments.
With liquidity levels rising and demand for government securities softening, investors will be closely watching CBN’s policy actions and broader economic signals in the weeks ahead.
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