Nigeria’s Bonds and Treasury Bills Rally as N6.17 Trillion Liquidity Boost Drives Yields Down
Nigeria’s fixed-income market witnessed a strong rally last week as excess liquidity of N6.17 trillion triggered a significant fall in yields across bonds, Treasury bills, and Eurobonds. The surge in market cash reversed slight increases from the previous week, pushing total debt traded on FMDQ to N91.89 trillion, up from about N88 trillion. Analysts attribute the rally to a combination of central bank operations, primary market repayments, and investor appetite for safer assets.
The Central Bank of Nigeria’s (CBN) Standing Deposit Facility and Open Market Operation (OMO) maturities were key drivers of the liquidity boost. Cordros Research highlighted that N3.63 trillion in OMO maturities positioned the market N5.09 trillion net long even before any CBN mop-up interventions. This influx of funds reduced banks’ need for overnight borrowing, though the overnight rate edged slightly higher to 24.9%. Overall, short-term funding pressures eased significantly.
Treasury bills saw heightened demand, pulling yields lower. Cowry Assets reported that average NTB yields fell 44 basis points to 16.98%, fueled by strong purchases of the newly issued 5-Nov bill. The November 13 OMO auction, which offered N2.55 trillion in short-tenor bills, was oversubscribed by 515%, signaling overwhelming investor enthusiasm. With a N700 billion NTB auction scheduled for November 19, analysts expect demand for government securities to remain robust.
The Nigerian bond market also reflected renewed confidence, with average FGN bond yields falling 20 basis points to around 15.57%. Short and mid-term bonds recorded the sharpest declines, particularly FEB-2031 (-42bps) and APR-2032 (-54bps). Analysts link this positive trend to improved fiscal signals, steady monetary conditions, and the appeal of Nigerian sovereign assets amid broader market volatility. Eurobonds followed suit, with average yields declining 21 basis points to 7.77%, reflecting renewed foreign investor interest.
Market experts, including Cowry Assets and Cordros Research, expect Nigeria’s fixed-income universe to maintain its upward trajectory as massive liquidity, easing inflation expectations, and sustained investor demand continue to drive yields down. With two additional OMO auctions planned next week, the CBN signals its commitment to market stability. For investors, this environment reinforces the strategic appeal of Nigerian bonds, Treasury bills, and Eurobonds as defensive instruments in a volatile market.
source: nairametrics