System liquidity in Nigeria rebounded to a surplus of N518.9 billion in November 2024, up from a deficit of N207.6 billion in October, according to Afrinvest’s Monthly Market Report. This recovery was driven by substantial inflows, including N1.3 trillion from primary market repayments and N7.3 billion from Open Market Operations (OMO) repayments, which exceeded outflows like OMO sales and standing deposit facility withdrawals. Despite the liquidity boost, interbank rates for Open Repo (OPR) and Overnight (OVN) surged to 29.3% and 29.9%, reflecting ongoing tight monetary conditions influenced by Central Bank of Nigeria (CBN) interventions.
In the primary market, the CBN’s efforts to manage liquidity through OMO and NT-bill auctions revealed a preference for long-term instruments. While short- and mid-dated notes saw limited investor demand, long-term offerings recorded a robust bid-to-offer ratio of 5.8x. Stop rates for NT-bills rose across all tenors, reaching 18.0% for 91-day, 18.5% for 182-day, and 23.5% for 364-day instruments. Analysts attributed this trend to investors seeking higher yields amid persistent inflation and other macroeconomic challenges.
In the secondary market, average yields climbed to 26.2%, driven by sell-pressure on both short- and long-term instruments, while mid-term notes experienced buy-interest. Looking ahead, December is expected to see reduced system liquidity as the CBN conducts bond and discretionary T-bill auctions to manage inflows from maturing OMO and FGN bonds. Market sentiment remains cautious following the 25bps rate hike announced at the November MPC meeting, signaling sustained pressures on yields and liquidity.
