OMO repayments to push banking system liquidity to N3tn this week

Liquidity inflows into Nigeria’s financial system are projected to surge sharply this week, rising from an estimated N1.13 trillion recorded last week to N3.03 trillion, representing an increase of about 168 percent week-on-week, according to FMDA.

The sharp increase is expected to be driven largely by significantly higher Open Market Operations (OMO) maturities and stronger bond coupon payments.

 

The report by FMDA shows that OMO maturities remain the largest source of liquidity injection, rising from N1.01 trillion last week to N2.25 trillion this week. This indicates that the Central Bank of Nigeria (CBN) will inject substantial liquidity into the banking system as previously issued OMO bills mature and repayments are made to investors. Analysts said the large maturity profile is expected to sustain robust liquidity conditions across the financial system and could support stronger demand for fixed-income instruments in the near term.

 

Treasury bills maturities, which contributed no inflows last week, are projected to inject an additional N583.29 billion into the market this week, further strengthening system liquidity. Combined, OMO and Treasury bill maturities account for nearly N2.84 trillion, representing the bulk of expected inflows into the financial system.

 

FGN bond coupon payments also increased significantly to N161.28 billion this week from N84.65 billion last week, reflecting higher interest payments to bondholders and additional liquidity circulation within the market.

 

Corporate bond coupon payments also rose sharply from N1.71 billion to N31.90 billion, although the contribution remains relatively modest compared to government-related inflows.

 

In contrast, commercial paper maturities, which injected N36.4 billion into the system last week, are absent this week. There are also no projected inflows from FGN bond maturities, corporate bond maturities, or FAAC disbursements in both periods.

 

Overall, the liquidity outlook points to a significantly cash-rich financial system this week. Analysts noted that the sizeable inflows could moderate short-term interest rates, increase investor participation at primary market auctions, and support stronger demand for fixed-income securities unless the CBN moves to mop up excess liquidity through fresh OMO issuances or other monetary tightening measures.

 

A report by the Financial Markets Dealers Association stated that system liquidity remained elevated at N6.29 trillion, supported by sizeable inflows from maturing securities.

 

The report added that an estimated N3.03 trillion is expected to flow into the system this week, with OMO maturities accounting for about 74 percent of the projected inflows.

 

Meanwhile, oil prices edged higher by 1.07 percent to an average of $106.52 per barrel as renewed geopolitical tensions sustained concerns over global supply disruptions.

 

Despite improved foreign exchange liquidity conditions, the naira depreciated marginally across both the official and parallel markets.

 

In the fixed-income market, FGN bond yields moderated slightly across most maturities, reflecting improved investor demand and relatively stable market conditions.

 

Treasury bill yields, however, recorded mixed movements, with slight increases observed at the mid-tenors, while the average yield declined marginally to 17.45 percent.

 

Across global markets, bond yields edged higher amid persistent inflation concerns and cautious monetary policy expectations among major central banks.

 

Nigeria’s long-term benchmark yield nevertheless remained broadly stable despite upward movements in yields across major developed and African markets.