N2.45tn Liquidity Inflow Expected in Banking System as DMO Plans N800bn T-bills

Nume Ekeghe

Nigeria’s banking system is expected to receive N2.448 trillion in liquidity inflows this week, largely driven by maturing Open Market Operations (OMO) bills, even as the Central Bank of Nigeria (CBN) and the Debt Management Office (DMO) prepare fresh debt auctions to absorb excess cash from the financial system.

This is according to the Weekly Market Report by the Financial Markets Dealers Association (FMDA), where it projected that OMO maturities would account for N2.298 trillion of the expected inflows, while Treasury bills maturities would contribute N148.565 billion.

The anticipated liquidity injection comes against the backdrop of sustained efforts by the CBN to manage excess naira liquidity, with the apex bank raising N5.667 trillion through OMO auctions conducted on November 3 and 6.

According to the report: “System liquidity still rose 15.36 per cent w/w to N8.505 trillion from N7.373 trillion, even as CBN leaned hard on OMO to absorb the surplus, raising N5.667 trillion across the 3 and 6 November auctions alone, already 91.7 per cent of the entire N6.182trn raised through OMO in October, while the DMO continued to ration NTB allotment, rejecting roughly 75.1 per cent of the N2.045 trillion in bids at the 4 November auction and allotting just N509.401billion against an N800 billion offer.

“Inflows are projected at N2.448 trillion this week, led by N2.298trn of OMO maturities and N148.565billion of T-bill maturities; the DMO returns to the primary T-bill market on 11 November with an N800billion offer (N100billion 91-day, N100billion 182-day, N600billion 364-day), settling 12 November, leaving that auction as the main scheduled drain this week alongside any further OMO absorption.”

The anticipated inflows are expected to test the CBN’s liquidity management strategy, particularly as the DMO prepares to raise fresh funds from the market. The N800 billion offer, against only N148.565 billion in Treasury bills maturities, also provides an avenue to withdraw liquidity from the financial system, alongside potential further OMO interventions.

Meanwhile, the foreign exchange market recorded divergent movements, with the naira appreciating at the official window but weakening at the parallel market.

FMDA stated: “The naira diverged this week, the NFEM rate firmed 0.34 per cent to N1,347.64/$, even as the parallel rate weakened 1.38 per cent to N1,410.60/$, widening the premium between the two windows to N62.96 from roughly N39 the week before, a reversal of October’s narrowing trend.”

The country’s external reserves also declined marginally by 0.16 per cent week-on-week to $55.133 billion, following their recent rise above the $55 billion mark, the highest level since December 2008.

In the international oil market, average Brent crude fell by 13.45 per cent to $99.97 per barrel, retreating from an intraday high above $116 recorded the previous week. FMDA attributed the decline to easing Middle East supply concerns following signs of de-escalation involving Iran after the United States midterm elections.

In the fixed-income market, average FGN bond yields rose by 20 basis points to 16.37 per cent, driven largely by the seven-year instrument, which increased by 104 basis points. Conversely, Treasury bills yields declined by 35 basis points to 17.67 per cent, reflecting a divergence in movements across both segments of the market.