FRI JUNE 12 2026-theGBJournal| Nigeria’s money market liquidity tightened this week as the Central Bank of Nigeria’s (CBN) aggressive liquidity management operations offset maturing securities, pushing short-term funding costs higher and triggering a broad selloff across fixed-income markets.
The overnight lending rate rose by 6 basis points week-on-week to 22.2%, reflecting the impact of Open Market Operations (OMO) Primary Market Auction (PMA) debits totaling N1.69 trillion, which slightly exceeded inflows of N1.64 trillion from maturing OMO instruments.
The liquidity drain reduced the banking system’s average net long position to N4.19 trillion from N4.66 trillion in the preceding week, highlighting a moderation in excess liquidity despite still-elevated system balances.
In the Treasury bills market, investor sentiment turned bearish as yields adjusted upward following changes to the government’s borrowing programme.
Average secondary-market Treasury bill yields climbed 8 basis points to 18.8%, with the Nigerian Treasury Bill (NTB) segment recording a sharper 15-basis-point increase to 17.7%.
Market participants repriced securities after authorities revised the NTB issuance calendar, increasing the planned size of the June 17 auction to N1 trillion from an earlier N450 billion.
The larger supply expectation weakened demand in the secondary market as investors positioned for potentially more attractive yields at the primary auction.
The OMO market also came under pressure, with average yields rising 7 basis points to 21.0% as investors unwound existing positions ahead of the CBN’s latest auction.
The apex bank offered N600 billion across available tenors but attracted overwhelming demand of N1.69 trillion, underscoring persistent investor appetite for high-yielding risk-free instruments.
The CBN ultimately allotted the full N1.69 trillion demanded, with stop rates clearing at 21.89% for the 8-day tenor and 20.02% for the 134-day tenor, reinforcing expectations that monetary conditions will remain tight amid the bank’s inflation-fighting stance.
Selling pressure was even more pronounced in the Federal Government bond market, where yields posted their steepest weekly increase. Average benchmark bond yields rose 36 basis points to 16.7% as domestic investors trimmed holdings across the curve.
The mid-tenor segment recorded a 40-basis-point rise, driven largely by selloffs in the April 2029 bond, whose yield jumped 90 basis points. At the long end, yields climbed 55 basis points, led by the June 2038 bond, which surged 116 basis points.
The short end of the curve was the lone outperformer, with yields declining 3 basis points as investors sought the March 2027 bond, driving its yield down by 119 basis points.
The synchronized rise in Treasury bill, OMO and bond yields signals a market increasingly adjusting to tighter liquidity conditions and heavier government borrowing requirements.
With the CBN continuing to sterilize excess liquidity through large-scale OMO issuances and the Debt Management Office ramping up Treasury bill supply, investors are demanding higher returns across maturities, a trend that could keep upward pressure on yields in the near term.
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