Banks Brace For N3.1trn Liquidity Surge From FAAC, OMO Bills
Nigeria’s banking system is expected to witness a significant liquidity boost this week as inflows from Federation Account Allocation Committee (FAAC) disbursements and maturing Open Market Operations (OMO) bills, estimated at over N3.1 trillion, enter the financial system.
Analysts said the anticipated inflow, comprising over N1.2 trillion from FAAC allocations and approximately N1.97 trillion from maturing OMO bills, is expected to sustain elevated liquidity levels and keep short-term funding rates relatively stable despite the Central Bank of Nigeria’s (CBN) aggressive liquidity-tightening measures.
The development comes as the money market closed the week with a positive liquidity balance of N2.79 trillion, though lower than the N3.82 trillion recorded in the previous week, due to debits from OMO issuances, Treasury Bill settlements, and repayments from Federal Government bond auctions.
At the beginning of the week, system liquidity opened at N3.6 trillion, supported by inflows from maturing OMO bills and Treasury Bills valued at N934.47 billion. The strong liquidity position eased funding pressures across the banking sector, causing the overnight funding rate to decline by six basis points week-on-week to 22.24 per cent, while the Open Repo Rate remained unchanged at 22 per cent.
Similarly, the overnight Nigerian Interbank Offered Rate (NIBOR) fell by five basis points, reflecting improved short-term liquidity conditions despite the apex bank’s tight monetary policy stance. However, medium- and long-term funding expectations remained elevated, as the one-month, three-month, and six-month NIBORs rose by 32 basis points, 94 basis points, and 114 basis points, respectively.
In the fixed income market, the Nigerian Interbank Treasury Yield (NITTY) curve trended upward across most maturities. While the one-month tenor declined by 19 basis points to 15.80 per cent, the three-month, six-month and 12-month tenors rose by 20 basis points, four basis points and 26 basis points, respectively.
Meanwhile, the Treasury Bills secondary market traded on a mildly bearish note following selective sell-offs at the medium and long end of the curve, pushing the average NT-Bills yield marginally higher by two basis points to 17.52 per cent from 17.50 per cent.
At the primary market auction conducted by the Debt Management Office (DMO), investor appetite remained robust, with total subscriptions rising to nearly N2 trillion against the N650 billion offered across standard maturities.
The DMO eventually allotted N829.3 billion, with stop rates unchanged at 15.95 per cent for the 91-day tenor, 16.14 per cent for the 182-day instrument and 16.15 per cent for the 364-day bill.
Also, at the OMO auction held by the CBN this week, the apex bank offered N600 billion across the 33-day and 138-day tenors but attracted subscriptions worth N3.69 trillion, highlighting strong investor demand for high-yield fixed-income instruments.
The CBN subsequently allotted the entire N3.69 trillion at stop rates of 21.57 per cent and 19.97 per cent, respectively.
In the bond market, bearish sentiment persisted as offshore investors offloaded longer-dated instruments, pushing the average bond yield up 12 basis points to 16.2 per cent.
At the Federal Government bond auction, the DMO reopened the JAN-2035 and APR-2037 bonds with a combined offer size of N600 billion. However, total subscriptions settled lower at N516.15 billion, while allotment stood at N334.53 billion. The stop rate on the JAN-2035 bond rose by 41 basis points to 17 per cent, while the APR-2037 bond closed at 17.04 per cent.
Analysts, however, projected that liquidity conditions would remain supportive in the medium term, although elevated government borrowing and sustained risk-off sentiment from offshore investors may slow the pace of yield moderation in the fixed income market.
المصدر: Leadership (Nigeria)
