Short-term Rates Steady as System Liquidity Approaches N6trn
Open repo, and overnight lending rates were steadied despite a surge in liquidity level in the financial system last week. The money market closed with excess liquidity of about N6 trillion despite primary market auctions.
System liquidity improved week on week, closing at approximately ₦5.9 trillion, up from ₦5.7 trillion in the previous week. The increase was largely driven by net positive inflows from Open Market Operations (OMO) repayments, according to investment firms.
Despite the improved liquidity position, funding conditions remained broadly stable at the close of the week, with the Open Repo Rate (OPR) unchanged at 22.0% and the Overnight (O/N) rate steady at 22.2%.
Looking ahead, funding conditions are expected to remain relatively stable in the near term, barring any significant liquidity shocks, CSL Stockbrokers said in its commentary note.
Market analysts said this outlook is supported by anticipated inflows from maturing bills amounting to ₦634.47 billion in Nigerian Treasury Bills (NTBs) and ₦2.25 trillion in OMO bills, although these inflows are likely to be partially offset by fresh issuances in the coming week.
The Apex Bank conducted open market operations last week, during which a total of ₦600.0 billion was offered in OMO bills across all tenors, attracting strong demand, with total subscriptions of ₦2.7 trillion.
Total allotments stood at approximately ₦1.6 trillion, comprising ₦25.0 billion for the 30-day tenor at 21.5%, ₦91.0 billion for the 70-day tenor at 20.7%, and ₦1.45 trillion for the 126-day tenor at 20.1%.
In the Treasury bill secondary market, trading activity was mixed, with a bullish tone, reflecting cautious, positive investor sentiment. The average benchmark yield declined slightly by 8bps to 17.5%.
In the near term, sentiment is expected to stay positive, supported by continued investor preference for short-dated instruments amid prevailing global risk-off conditions and capital flow uncertainties.
