Nigeria’s financial market would be awash with liquidity as maturing Open Market Operation (OMO) bills, treasury bills (TBs) and bond coupon worth N359 billion hit the financial market this week.
A breakdown of the inflows shows that the Central Bank of Nigeria (CBN) is scheduled to roll over maturing Nigerian (NT-Bills) worth N107.1 billion through a Primary Market Auction (PMA) on Wednesday.
Similarly, inflows from both maturing OMO instruments (N146.9bn) and bond coupon payments (N105.0bn) will help to improve system liquidity.
“Due to the huge level of maturity this week, we expect the NTBills PMA will be oversubscribed, leading to further drop in stop rates. We also expect the CBN to conduct OMO auction on Thursday to keep system liquidity in check,” Ayodeji Ebo, managing director, Afrinvest Securities Limited, says.
The NTBills secondary market last week traded with mixed sentiments largely driven by depressed liquidity levels. At the start of the week, system liquidity opened negative at – N95.2 billion following the previous week’s CRR debit by the CBN. This triggered mild selloffs as well as increased borrowings from the CBN’s standing lending facility, which further worsened system liquidity to (- N273.6bn) on Wednesday, according to a report by Afrinvest.
However, sentiments slightly improved on Thursday as combined inflows from OMO maturities worth N 92.5 billion and a late CRR refund (about N300bn) ushered in trickles of demand on the short-term bills.
Consequently, average yield across the yield curve ticked higher by 2bps W-o-W to settle at 2.1 percent with system liquidity closing at N128.3 billion long on Friday. Notably, most of the selloffs occurred at the belly of the yield curve: 29-Oct-20 (+47bps), 12-Nov-20 (+40bps) and 26-Nov-20 (+33bps) bills.
At the bond market, bearish sentiments resurface as average yield advances to 8.0 percent on tight system liquidity.
Against the backdrop of the liquidity squeeze, the rally in the domestic bond market also ended last week as average yield advanced 16bps W-o-W to settle at 8.0 percent. Specifically, selloffs were more pronounced on the short-dated bonds following gains on the 27-Apr-2023 (+136bps), 15-Jul-2021 (+111bps), and 14-Mar-2024 (+84bps) instruments.
Conversely, yields on medium- and long-term bonds declined 12bps and 3bps W-o-W, respectively, due to mild buying interests.
“We envisage inflows from bond coupon payments (N105bn) to stimulate demand as investors seek to re-invest some of their funds amid the relatively attractive yields across the yield curve,” analysts at Afrinvest note.
The foreign exchange market opened on Tuesday with naira weakening by N2 as the dollar traded at N467 as against N465 traded since Thursday last week.
The market opened with an indicative rate of N387.92k on Tuesday, signalling a depreciation of N0.46k when compared with N387.46k opened with on Monday, data from FMDQ show.
At the I&E window, the foreign exchange daily turnover increased by 44.14 percent to $36.28 million on Monday from $25.17 million recorded on Friday last week.
