Nigerian Money Market Liquidity Rebounds in February, Likely to Sustain Bullish Trend

In February 2025, the Nigerian money market witnessed a notable improvement in system liquidity, reaching N572.8 billion, compared to a deficit of N307.5 billion recorded in January. This rebound was primarily driven by N2.9 trillion in primary market repayments and liquidity injections. Additionally, open market operations (OMO) repayments of N823.3 billion and standing lending facility (SLF) totaling N24.2 trillion surpassed outflows from OMO sales, primary market auctions, and the standing deposit facility.

The Federation Account Allocation Committee (FAAC) disbursed N1.24 trillion to ease liquidity constraints at the end of February, helping to stabilize the market. Despite the Central Bank of Nigeria maintaining unchanged interest rates, the disbursement and the substantial liquidity inflows were crucial in reducing tight conditions. This resulted in a drop in the Open Position Rate (OPR) and Overnight (OVN) rates by 2.4 and 2.2 percentage points, respectively, compared to January.

In the primary market, the Central Bank of Nigeria offered N1.4 trillion in OMO and T-bills, with strong investor interest, particularly in longer-maturity instruments. The auction saw a bid-to-cover ratio of 2.5x, with demand centered on the 362-day notes. The clearing rates for the T-bills were lower than the previous month, reflecting the continued investor preference for higher yields amid a favorable inflation outlook following the CPI rebasing.

Looking ahead, analysts expect the trend of liquidity improvement to continue, bolstered by an estimated N2.6 trillion in bond coupon payments and maturities. Market participants are likely to remain cautious but opportunistic, responding to changing liquidity conditions, monetary policy decisions, and yield movements. The ongoing liquidity influx and positive investor sentiment suggest that the market may maintain its bullish momentum in the coming months.

SOURCE: THE SUN