THUR AUG 20 2026-theGBJournal| Nigeria’s money markets showed contrasting signals, with overnight funding costs rising amid a lack of fresh liquidity, while sustained demand for government securities pushed Treasury bill and FGN bond yields lower.
The overnight lending rate rose 17 basis points to 22.4%, reflecting tighter liquidity conditions in the banking system in the absence of any significant inflows.
The move signals increased pressure on banks to secure short-term funding as available liquidity remained constrained.
In the secondary Treasury bill market, trading was relatively subdued but retained a bullish bias, with the average yield declining by 1 basis point to 18.6%.
Demand was concentrated at both ends of the curve, although the overall move remained modest.
At the short end, average yields declined by 1 basis point, driven by demand for the 85-day-to-maturity (DTM) bill, whose yield also fell by 1bp.
At the long end, yields similarly contracted by 1bp, supported by buying interest in the 183-DTM bill, where the yield fell sharply by 23bps.
The mid segment was unchanged.
The bullish tone was more pronounced in the Open Market Operations (OMO) segment, where average yields contracted by 11bps to 21.0%, indicating stronger demand for the central bank’s sterilisation instruments.
FGN Bonds Extend Gains
The FGN bond market also closed on a bullish note, with the average yield falling 11bps to 16.6%, as investors continued to favour selected government securities.
The move was led by gains across the short and mid sections of the benchmark curve.
Average yields at the short end declined 35bps, driven by strong demand for the March 2027 bond, whose yield compressed by a substantial 193bps.
The mid segment recorded a more modest 1bp decline, supported by demand for the March 2035 bond, which saw its yield fall 4bps.
The long end bucked the broader trend, with average yields rising 1bp, as investors took profits on the April 2037 bond, pushing its yield 7bps higher.
The divergent moves across the money and fixed-income markets underline a market increasingly shaped by liquidity conditions and selective positioning.
While tighter overnight funding points to near-term pressure in the banking system, demand for government securities continues to support prices and compress yields, particularly in selected benchmark maturities.
We note that the combination of elevated short-term funding costs and firmer demand for sovereign debt points to a market where liquidity remains tight but appetite for fixed-income assets is proving resilient.
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