Nume Ekeghe

Financial system is expected to receive a substantial liquidity injection of N3.39 trillion this week, with maturing Open Market Operation (OMO) bills accounting for about 86 per cent of the anticipated inflows, according to the latest weekly market report by the Financial Markets Dealers Association (FMDA).

The projected inflows represent a sharp increase from the N1.53 trillion recorded in the previous week and are expected to significantly improve liquidity conditions across the banking system after a period of tightening.

FMDA noted that OMO maturities worth N2.93 trillion would constitute the largest source of liquidity this week, dwarfing inflows from Treasury bill maturities, FGN bond coupon payments and other instruments. Treasury bill maturities are expected to contribute N331.88 billion, while FGN bond coupon payments are projected at N126.36 billion.

The anticipated liquidity surge follows a challenging week in which average system liquidity declined by 13.69 per cent as the Central Bank of Nigeria (CBN) mopped up approximately N1.49 trillion through Treasury bill auctions, while lower levels of maturing securities limited fresh liquidity injections into the financial system.

It stated, “Average system liquidity declined significantly by 13.69% last week, as the CBN withdrew an estimated N1.49 trillion through Treasury bill auctions, while lower maturities limited liquidity injections into the financial system. Looking ahead, liquidity conditions are expected to improve, with about N3.39 trillion projected from maturing securities this week. OMO maturities account for approximately 86 per cent of the expected inflows. In the fixed income market, yields continued to trend upward as investors demanded higher returns. Average Treasury bill yields rose sharply by 72 basis points to 18.31 per cent, while average FGN bond yields edged higher by two basis points to 16.95 per cent.”

FMDA attributed the increase in Treasury bill yields to weaker demand and investors’ preference for higher returns amid prevailing market conditions.

“Secondary market activity, however, strengthened considerably. Treasury bill turnover surged by 137.49 per cent to N1.51 trillion, while FGN bond trading volume increased by 75.91 per cent to N1.20 trillion, highlighting renewed investor participation despite the rise in yields,” it said.

The report further showed that Nigeria’s benchmark 10-year government bond yield rose by 17 basis points to 17.61 per cent, even as yields across major global bond markets generally declined.

It stated, “FGN bond yields edged higher across most maturities during the week, with the average yield rising marginally by 2bps to 16.95 per cent, reflecting mild bearish sentiment in the secondary market. Treasury bill yields increased sharply across the curve, with the average yield rising by 72bps to 18.31 per cent, driven by weaker demand and investor preference for higher returns.

“Secondary market activity strengthened significantly, with Treasury bill turnover surging by 137.49 per cent to N1.51 trillion, while FGN bond trading volume increased by 75.91 per cent to N1.20 trillion. Despite declining global bond yields across most major economies, Nigeria’s benchmark 10-year bond yield increased by 17bps to 17.61 per cent, suggesting that domestic liquidity and inflation concerns continued to drive local fixed income pricing.”