The Nigerian money market endured considerable liquidity pressure last week despite substantial inflows from maturing Treasury bills and Open Market Operations (OMO) instruments totalling N258 billion and N600 billion respectively.
These inflows proved insufficient to alleviate the tight liquidity environment as financial institutions actively sought funds to meet short-term funding requirements.
The liquidity strain was further exacerbated by the settlement of OMO sales totalling N2.1 trillion by the Debt Management Office (DMO), effectively absorbing the excess liquidity in the system.
Consequently, the Nigerian Interbank Offered Rate (NIBOR) rose across all tenors, with the Overnight, one-month, three-month, and six-month rates climbing to 26.92%, 27.71%, 28.38%, and 29.14% respectively.
This broad-based increase signalled intensified pressure on short-term funding. The Open Buy Back (OPR) rate remained unchanged at 26.50%, whilst the Overnight (O/N) rate rose marginally by 10 basis points to 27.00%, reinforcing the tight funding conditions.
The Nigerian Interbank Treasury Bills True Yield (NITTY) curve reflected mixed movements. The one-month, three-month, and six-month tenors rose by 11 basis points, 46 basis points, and one basis point to close at 16.10%, 18.32%, and 19.10% respectively.
Conversely, the three-month tenor declined by 32 basis points to settle at 16.94%, indicating some easing in select segments.
In the secondary Treasury bills market, bearish sentiment prevailed amid shifting global risk dynamics as the average yield on Treasury bills rose by 15 basis points to close at 17.91%.
The Central Bank of Nigeria (CBN) conducted a Nigerian Treasury Bills (NTB) auction on Wednesday, offering N220 billion across the standard tenors.
The auction attracted strong investor interest with total subscriptions amounting to N367 billion, resulting in a bid-to-offer ratio of 2.12 times.
Despite this demand, the final allotment stood at N173 billion, below the original offer. Whilst stop rates for the 91-day and 182-day papers were held steady at 15.00% and 15.50% respectively, the 364-day tenor recorded an increase in yield, closing at 16.50%, up from 15.88% in the previous auction.
In a separate OMO bills auction, the DMO offered N600 billion split between 105-day and 245-day papers. The total subscription reached a substantial N2.20 trillion. Total sales settled at N2.12 trillion, resulting in a bid-to-cover ratio of 1.04 times.
The stop rate for the 245-day maturity was set at 23.70%, whilst the 105-day offer recorded neither a sale nor a published rate.
As a new trading week commences today, the absence of maturing instruments is expected to keep system liquidity constrained.
With limited inflows anticipated, competition for available funds amongst banks and financial institutions will likely intensify, placing upward pressure on NIBOR and other short-term money market rates.
