System liquidity moderated sharply last week, declining from an opening balance of N4.68 trillion to N2.16 trillion by Friday following aggressive liquidity sterilisation through Treasury bill and Open Market Operations (OMO) auctions.
The contraction was driven by the N1.15 trillion Nigerian Treasury Bills (NTB) issuance by the Debt Management Office (DMO) and the N2.30 trillion OMO auction conducted by the Central Bank of Nigeria (CBN). These outflows more than offset the N1.86 trillion credited to the system from OMO maturities during the week.
Despite the liquidity squeeze, funding conditions remained broadly stable. The Open Repo Rate (OPR) closed flat at 22.50 percent, while the Overnight Rate (OVN) eased marginally from 22.78 percent to 22.71 percent, indicating that banks were still able to access short-term funding without significant stress.
Primary market activity remained robust. The DMO offered N1.15 trillion across the 91-day, 182-day and 364-day tenors, attracting total subscriptions of N4.28 trillion, slightly below the N4.59 trillion recorded at the previous auction.
However, total allotments rose significantly to N1.91 trillion from N952.61 billion, reflecting stronger supply absorption.
Investor demand was heavily concentrated on the 364-day tenor, which attracted N4.07 trillion in bids. The DMO allotted N1.71 trillion at a stop rate of 15.90 percent, representing a 109 basis point decline from the previous 16.99 percent.
At the short end, the 91-day and 182-day bills recorded subscriptions of N112 billion and N93.75 billion, clearing at 15.80 percent and 16.65 percent, respectively.
At its OMO auction during the week, the CBN offered N600 billion across the 7-day and 105-day maturities. Demand surged to N2.38 trillion, significantly above the offer size.
The apex bank ultimately allotted N2.30 trillion solely on the 105-day tenor at a stop rate of 19.44 percent, highlighting sustained investor appetite for attractive short-dated yields despite ongoing liquidity tightening.
In the secondary market, sentiment turned bullish as buying interest compressed yields across instruments. Average Treasury bill yields declined by 10 basis points week-on-week to 17.45 percent, while OMO yields fell by 65 basis points to 20.51 percent.
FGN bond yields also eased by 9 basis points to 16.02 percent, and Eurobond yields declined by 11 basis points to 6.89 percent, reflecting improved investor sentiment.
Looking ahead, yields are expected to remain range-bound in the near term, with direction likely to be influenced by upcoming Monetary Policy Committee decisions and further primary market supply dynamics.
