THE Nigerian money market is expected to receive about N3.0 trillion in potential inflows this week, a development that could ease liquidity pressures and moderate short-term interest rates, following renewed sterilisation by the Central Bank of Nigeria (CBN).
The expected inflows comprise N2.26 trillion in OMO maturities due on September 1, and N735 billion in Nigerian Treasury Bills (NTB) maturities due on September 2. The combined inflows are significant relative to the N3.61 trillion system liquidity recorded at the close of the week.
Market analysts said the maturities could provide temporary relief to banks and other market participants, although the extent of the easing will depend on the CBN’s response to the additional liquidity.
Money market liquidity tightened during the week, as the apex bank resumed aggressive sterilisation through OMO operations, despite sizeable maturities that provided intermittent support.
System liquidity opened at N5.46 trillion on Monday, following N139.15 billion in inflows. By Wednesday, however, the CBN absorbed N2.79 trillion through an OMO auction, more than offsetting N2.32 trillion in OMO maturities and leaving liquidity at N4.61 trillion, against a potential N7.40 trillion without the intervention.
The liquidity drain continued on Thursday, with another N2.69 trillion OMO allotment, alongside N763 billion in NTB settlements. System liquidity subsequently closed the week at N3.61 trillion.
Despite the liquidity mop-up, overnight funding conditions remained relatively stable. The overnight rate declined by seven basis points to 22.21 percent, while the funding rate remained at 22.00 percent. Overnight NIBOR also eased by one basis point to 22.229 percent.
However, the one-month, three-month and six-month NIBOR rates increased by 11, 28 and 34 basis points, respectively, indicating expectations of tighter funding conditions over the medium term.
In the secondary Treasury bills market, average yields at the short and mid segments rose by 65 and 32 basis points, respectively, while the long end declined by 14 basis points. Overall average yield increased by 23 basis points to 18.92 percent.
The latest NTB auction also showed strong investor demand. The N700 billion offered attracted N3.79 trillion in subscriptions, representing a 5.41 times bid-to-cover ratio, while total allotment stood at N762.89 billion.
The 364-day bill attracted N3.63 trillion in subscriptions, with its stop rate falling 44 basis points to 17.15 percent. Stop rates for the 91-day and 182-day bills remained at 16.30 percent and 16.50 percent.
At the OMO auction, N4.3 trillion was subscribed against N1 trillion offered, prompting the CBN to allot about N2.8 trillion.
Analysts expect liquidity and the balance between maturities, new issuance and CBN sterilisation to remain the key drivers of short-term money market rates.