Liquidity improves in Nigeria’s money market

Nigeria's money market experienced a boost in liquidity on Thursday following an Open Market Operation (OMO) maturity inflow of around $396 billion. Constance O'Reney, a fixed income dealer at Access Bank, shared insights on the recent trading session in the fixed income and forex market. The week kicked off with a positive note as market rates ranged from 10% to 14%, gradually trending downwards. This bullish trend was attributed to improved liquidity in the system, with approximately $390 billion in circulation. Local investors seized the opportunity to purchase short-dated maturities in the treasury bill space, driving rates to attractive levels. The 91-day bill was recorded trading at 12%, surpassing the rates from the previous auction. Investors were drawn to these higher yields, indicating a positive market sentiment. The Central Bank of Nigeria's (CBN) primary market auction saw strong demand this week, with oversubscriptions across various tenors. The 1-year instruments received a 145% subscription rate, pushing rates from 11% to 12.89%. Despite the anticipation of a rate hike, market players had already factored in the adjustment, with bills trading at 12.5% to 12.7% on the long end. The market remained stable with rates closing at 12.89% for the long tenors. An OMO maturity inflow on Thursday provided additional liquidity, with the long end witnessing an oversubscription and rates closing at 13%. As a result, around $345 billion remained in the system, supporting interbank rates at 5% to 6%. Looking ahead, the frequency of auctions is expected to be maintained until liquidity levels normalize, with possible adjustments in the coming week. The foreign exchange market maintained stability with rates hovering around 362 levels, supported by sustained dollar inflows from the CBN. The upcoming release of Q2 GDP figures by the National Bureau of Statistics is anticipated to have minimal impact as market sentiments have already priced in various scenarios, leading to a cautiously optimistic outlook. Overall, the market is characterized by a bullish sentiment, with expectations of continued stability in the near term.