The Nigerian money market experienced a significant rebound in system liquidity at the end of February 2025, with liquidity levels printing at N572.8 billion.
This is in contrast to a deficit position of N307.5 billion recorded in January.
According to monthly market by Afrinvest released at the weekend, the rebound was influenced by substantial inflows of N2.9 trillion from primary market repayment or liquidity injections.
Similarly, open market operations (OMO) repayment totaling N823.3 billion and standing lending facility (SLF) totaling about N24.2 trillion outpaced outflows via OMO sales (N1.4 trillion), primary market auctions (PMAs) (N1.4 trillion), and standing deposit facility (SDF) (N4.2 trillion).
Although, the Central Bank of Nigeria have left rates unchanged, the Federation Account Allocation Committee (FAAC) disbursement of N1.24 trillion helped ease tight liquidity conditions towards the end of the month, data from Standard Chartered Bank said.
As such, OPR and OVN fell 2.4ppts and 2.2ppts month-on-month (m/m) to 26.8 per cent and 27.3 per cent respectively.
In the primary market, CBN offered OMO (N1.4 trillion) and Tbills (N1.4 trillion) instruments at the auctions conducted in the month. At the OMO auction, instrument worth N1.4 trillion was offered across 355-day and 362-day tenors at 21.3 per cent and 21.5% respectively.
This auction was met by strong interest from investors with an overall bid-to-cover ratio of 2.5x. Most of the interest was on the 362-day notes with a bid-to-cover ratio of 1.5x. At the NT-bills auctions, instruments worth N1.4 trillion were offered cumulatively (Subscription: N5.6 trillion, Sales: N1.4 trillion).
Overall, the long-end of the curve saw the most interest (bid-to-offer ratio: 5.5x) while short- and mid-dated notes were less demanded with bid-to-offer ratios of 0.8x and 0.3x respectively.
The auction cleared at lower stop rates of 17.0 per cent, 18.0 per cent, and 18.4 per cent for the 91-day, 182-day, and 364-day bills, respectively, from 18.0 per cent, 18.5 per cent, and 21.0 per cent the prior month.
Commenting, Afrinvest attributed the performance to investors’ preference for longer-maturity instruments to move to lock in higher yields amidst expectations of deeper yield correction following the material decline in inflation figures post-CPI rebasing exercise.
In the secondary market, average yields contracted 3.3ppts m/m to 20.2 per cent, supported by buy interests on the short, mid, and long end of the curve with yield decreases of 2.6ppts, 2.8ppts, 4.6ppts m/m to 19.4 per cent, 19.8 per cent and 21.3 per cent respectively.
“Given expectations of net inflows of N2.6 trillion from bond coupon and maturities, we expect system liquidity dynamics to help sustain current bullish trend.
Furthermore, investors’ sentiment will be shaped by monetary policy decisions, liquidity conditions, and yield movements with a cautious yet opportunistic approach to market participation,” the report said.