SAT JULY 04 2026-theGBJournal| Nigeria’s interbank liquidity strengthened over the past week as large inflows from maturing Central Bank of Nigeria (CBN) Open Market Operation (OMO) bills outweighed liquidity absorbed through fresh OMO auctions
Consequently, funding pressures eased despite the monetary authority’s aggressive liquidity management.
The improved cash position pushed overnight borrowing costs slightly lower, while fixed-income markets came under pressure as investors repositioned for an anticipated increase in government securities supply during the third quarter.
The overnight (OVN) lending rate declined by 5 basis points to 22.2% after inflows of approximately N2.31 trillion from maturing OMO bills more than offset N1.17 trillion debited for the CBN’s OMO primary market auctions.
The liquidity injection lifted the banking system’s average net long position to N4.10 trillion during the week, compared with N3.57 trillion in the preceding week, reflecting a significant improvement in system liquidity.
Despite the stronger liquidity backdrop, activity in the Treasury bills secondary market remained bearish, with investors demanding higher yields amid expectations of increased debt issuance.
Average yields across Treasury instruments climbed 35 basis points to 19.9%.
Within the Nigerian Treasury Bill (NTB) market, average secondary market yields rose 9 basis points to 18.8% as market participants adjusted positions following the release of the Federal Government’s third-quarter 2026 Treasury bill auction calendar, which reinforced expectations of increased supply in the coming months.
The OMO secondary market also weakened, with average yields advancing 25 basis points to 21.8%, reflecting the impact of the CBN’s twin liquidity management operations conducted during the week.
The central bank held two OMO primary market auctions, attracting robust investor demand that significantly exceeded the amounts initially offered.
At Monday’s auction, the CBN offered N600 billion across multiple maturities and received subscriptions totalling N1.05 trillion. The apex bank ultimately allotted N947 billion, with stop rates closing at 21.71% for the 22-day instrument and 20.06% for the 134-day tenor.
Investor appetite remained strong at Tuesday’s auction, where the CBN again offered N600 billion but received subscriptions amounting to N1.59 trillion.
The central bank responded by allotting N1.40 trillion, with stop rates settling at 21.90% for the seven-day instrument and 19.80% for the 161-day tenor, underscoring continued demand for short-dated fixed-income assets despite elevated interest rates.
The Federal Government bond secondary market also traded weaker during the week, with average yields rising 8 basis points to 17.8% as offshore investor demand moderated amid growing attention to the sizeable third-quarter 2026 bond issuance programme.
Performance across the benchmark yield curve was mixed. Average yields at the short end declined by 20 basis points, supported by strong demand for the March 2027 bond, whose yield compressed by 112 basis points.
However, the mid- and long-term segments came under selling pressure, with average yields rising 13 basis points and 14 basis points, respectively.
The weakness was led by selloffs in the July 2034 bond, whose yield climbed 106 basis points, and the June 2038 bond, which recorded a sharper 170-basis-point increase as investors reduced duration exposure ahead of expected supply.
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