What to expect from Nigeria’s money markets in second half of 2020

As Nigeria enters the second half of 2020, the fixed income market is gearing up for a Treasury Bills auction, with the Debt Management Office set to rollover 88.8 billion naira across various standard tenors. To shed light on what we can expect from the market in the coming months, Constance Onyia, a Fixed Income Dealer at Access Bank, shared insights in an exclusive interview with CNBC Africa. Reflecting on the recent market trends, Onyia highlighted that in June, the Central Bank of Nigeria rolled over all maturing bills in the NCD space without overselling in any of the auctions. This cautious approach led to investors eagerly seeking opportunities to invest their funds, resulting in a notable demand for securities. For the upcoming Treasury Bills auction, Onyia projected that the 91-day, 182-day, and 365-day tenors could attract rates of around 2%, 2.2%, and 3.8% respectively, as investors continue to search for viable investment options. Transitioning to the Omo market, Onyia discussed the evolving strategy of the Central Bank, noting that while significant maturities are expected in July, the rollover amounts have been limited in recent months. This shift in strategy has created uncertainty regarding the potential outcomes of future auctions, with market participants closely monitoring the central bank's actions for indications of future market trends. Turning to the bond market, Onyia emphasized the robust activity levels observed, with strong demand driving subscription levels well above the offered amounts in recent auctions. Despite the Central Bank only accepting 100 billion out of the 155 billion offered in the last auction, subscriptions reached an impressive 550 billion, underscoring the market's appetite for fixed income securities. The secondary market has also witnessed heightened activity, with yields on certain maturities dropping to as low as 5% and 10% for different tenors, reflecting the prevailing bullish sentiment among investors. Looking ahead to the upcoming bond auctions in July, Onyia noted that the market anticipates substantial offerings by the Central Bank, further stimulating trading activity and potentially driving yields lower. However, the evolving strategies of the Central Bank add an element of unpredictability to the market dynamics, with participants keenly observing how these changes will impact investment decisions in the coming months. In conclusion, as Nigeria's fixed income market navigates the uncertainties of the current economic landscape, investors are advised to remain vigilant and adapt their strategies to the evolving market conditions. With a mix of optimism and caution shaping the market sentiment, the second half of 2020 promises to be an intriguing period for Nigeria's money markets as they continue to respond to dynamic macroeconomic factors and Central Bank policies.