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A recent report by Afrinvest reveals that the Nigerian money market experienced a significant boost in liquidity, surging by 62.3% to N2.2 trillion last week. This increase is attributed to banks tapping into available funds, which rose by 76.4% week-on-week.

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Despite this surge, the open repo rate remained steady at 32.4%, while the overnight rate dropped by 10 basis points to 32.9%. The Central Bank of Nigeria (CBN) offered N800 billion worth of treasury bills across three 91-day, 182-day, and 364-day – at the recent primary market auction

However, investor demand declined, with the bid-to-offer ratio falling to 1.1 times from 2.3 times in the previous auction. According to Afrinvest, “The 364-day instrument attracted the highest level of buying interest with a bid-to-cover ratio of 1.9 times, while the 91-day and 182-day bills recorded bid-to-cover ratios of 1.0 times and 1.1 times, respectively.”

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Compared to the previous auction, the stop rates on the 91-day, 182-day, and 364-day instruments rose by 100 basis points, 70 basis points, and 150 basis points, respectively, settling at 18.0%, 18.5%, and 19.9%.

In the secondary market, bearish sentiment from the prior week was reversed, with the average yield across all tenors declining by 40 basis points week-on-week to 19.4%. As stated in the report, “The mid- and long-dated papers recorded price appreciation as average yields dipped by 16 basis points and nine basis points, respectively, closing at 19.0% and 21.6%. However, the short-dated instruments faced sell pressure, leading to an average yield increase of 13 basis points to 17.6%.”

Looking ahead, Afrinvest projects that market sentiment in the coming week will be shaped by a treasury bill maturity of N1.2 trillion and the issuance of new primary market instruments worth N700 billion.

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