Nigerian Money Market Rates Dip as Liquidity Surges 35%
The money market closed with a significant credit balance, which kept interbank rates moving downward in the absence of significant funding pressures. Banking system liquidity rose by 25.35% week-on-week to N4.47 trillion from N3.57 trillion, ahead of midweek Treasury bill action.
The increase in the system credit balance was driven by N429 billion in primary market repayments and a substantial N3.01 trillion inflow from the Federation Account Allocation Committee (FAAC).
These inflows were more than sufficient to offset N805.2 billion in settlements related to the Federal Government of Nigeria (FGN) bond auction, thereby easing rates.
The robust liquidity helped maintain favourable money market conditions, even though the large bond settlements temporarily strained available cash balances.
Reflecting the absence of significant funding pressure, the short-term benchmark interest rates eased. The Central Bank of Nigeria (CBN) failed to float an OMO auction to mop up excess liquidity last week.
Data from the FMDQ platform showed that the overnight rate declined by 16 basis points to 22.36%, while the Open Repo Rate (OPR) held steady at 22.00%.
The rates positions indicated relatively stable funding conditions despite liquidity outflows from the bond auction. However, the Overnight NIBOR rose slightly by 2 basis points to 22.23%, suggesting some tightness in liquidity at the short end of the market.
In the treasury bills market, investor interest remained focused on the upcoming primary market auction as participants sought to lock in high yields ahead of potential declines.
Analysts said the easing of headline inflation to 15.43% in July 2026 has improved the real-return outlook for fixed-income investors, with nominal T-bill yields remaining comfortably above inflation.
Overall, trading activity in the secondary Treasury bills market was relatively subdued, with mixed sentiment across the yield curve. Mild bullish sentiment was observed in the midsection of the curve due to demand for attractive maturities, while the short and long ends faced bearish pressure.
The average Treasury bill yield settled at 18.57%, reflecting a modest 3-basis-point increase week-on-week, indicating that while there was some buying interest, investors continued to seek favourable entry points against the backdrop of an upcoming primary auction and prevailing liquidity conditions. Interbank Rates Little Changed as System Liquidity Tops N4.9trn
