Nigeria’s financial markets are poised for a liquidity influx exceeding N3 trillion, leading to lower short-term interest rates. Key factors include maturing treasury bills and bond repayments, causing a decline in the Nigerian Interbank Offered Rate (NIBOR). Increased demand for Treasury Bills reflects shifting investor preferences amid expectations of further liquidity. Cowry Assets Management anticipates continued downward pressure on money market rates due to ongoing liquidity inflows.
Nigeria’s financial markets are set to experience a liquidity influx exceeding N3 trillion in the short term. This is expected to significantly lower short-term interest rates, as more capital becomes accessible for lending. Major contributors to this liquidity surge include maturing treasury bills and bond repayments, creating favorable conditions for a declining interest rate environment.
Dealers from Cowry Assets Management Limited have indicated that the expected liquidity inflow will maintain pressure on short-term interest rates. Investors are currently analyzing conditions in the fixed-income market to make strategic decisions. “Looking ahead, we anticipate a further decline in money market rates in the coming week as liquidity inflows continue to shape market dynamics,” Cowry Assets Management stated.
Recent developments indicate that the Nigerian money market has already seen increased liquidity with an inflow of N1.7 trillion from the Federation Account Allocation Committee (FAAC). This surplus liquidity has resulted in a notable drop in the Nigerian Interbank Offered Rate (NIBOR) among all tenors, with the Overnight NIBOR experiencing a significant decline of 438 basis points to 28.54 percent.
Moreover, the one-month, three-month, and six-month NIBOR rates decreased by 17, 36, and 84 basis points, respectively, reflecting the liquidity excess in the interbank market. Additionally, both the Overnight (OVN) and Open Buy Back (OPR) rates moderated to 26.75 percent and 27.33 percent, respectively, despite N910.4 billion worth of Federal Government bonds being settled by the Debt Management Office (DMO), which temporarily curtailed some liquidity.
In the Nigerian Treasury Bills (NTB) market, the yield on the Nigerian Interbank Treasury Bills True Yield (NITTY) decreased across most tenors, except for a 21 basis point rise in the one-month NITTY. This shift suggests that investors are gravitating towards short-term securities amid expectations of further liquidity inflows. The outlook remains focused on an upcoming strong Primary Market Auction (PMA) for Treasury Bills this week.
The secondary Treasury Bills market has also exhibited bullish sentiment, with average yields declining by 35 basis points week-on-week. This trend is primarily influenced by heightened demand across various maturities, as investors are eager to secure favorable rates ahead of the anticipated liquidity surge.
The anticipated influx of over N3 trillion in the Nigerian financial markets is expected to drive down short-term interest rates. With significant liquidity from treasury bills and bond repayments, financial institutions are adapting to the changing market conditions. This environment is indicative of broader shifts within the money market, providing opportunities for strategic investor positioning as yields become more favorable.
Original Source: www.zawya.com
