Nigeria’s fixed-income market faces another test this week as the Debt Management Office (DMO) prepares to offer N800 billion in Treasury bills amid substantial liquidity inflows and continued efforts by the Central Bank of Nigeria (CBN) to absorb excess funds from the banking system.
The DMO is scheduled to conduct the primary market Treasury bill auction on October 28, offering N100 billion in 91-day bills, N100 billion in 182-day bills and N600 billion in 364-day bills, with settlement due on October 29.
The auction comes as projected system liquidity inflows stand at N2.813 trillion this week, largely driven by N2.408 trillion in Open Market Operations (OMO) maturities, according to the Financial Markets Dealers Association (FMDA).
Other expected inflows include N263.58 billion in Federal Government of Nigeria (FGN) bond coupons, N130.72 billion in Treasury bill maturities and N10.92 billion in corporate bond coupons.
The return of substantial OMO maturities could provide funds for banks and other investors to participate in the Treasury bill auction, although the extent to which the liquidity will remain available depends on further CBN operations and other market transactions.
The FMDA said system liquidity rose by 10.39 percent week-on-week to N6.936 trillion last week, from N6.283 trillion in the preceding week. However, the increase represented a sharp slowdown from the 69.39 percent surge recorded in the previous week.
The moderation followed significant liquidity absorption through government securities auctions, including the settlement of N2.024 trillion from the October 19 FGN bond auction on October 21 and the sale of N2.629 trillion in OMO bills by the CBN on October 22.
The OMO auction covered the 138-day and 180-day tenors at stop rates of 17.63 percent and 17.14 percent, respectively.
The transactions highlight the competing effects of maturing securities returning funds to the financial system and fresh government securities sales withdrawing liquidity from it.
With no further FGN bond auction scheduled until November 16, the Treasury bill sale represents the main scheduled government securities issuance expected to drain liquidity this week, alongside any additional OMO operations by the CBN.
Meanwhile, Treasury bill yields declined further last week, suggesting easing returns across much of the short-term government debt market.
The average Treasury bill yield fell by 59 basis points to 17.64 percent from 18.23 percent, led by a 198-basis-point decline in the one-month tenor to 16.85 percent and a 96-basis-point drop in the three-month tenor to 16.69 percent.
Yields on the six-month bills, however, rose by nine basis points to 17.79 percent, while the nine-month and 12-month tenors declined marginally to 18.52 percent and 18.35 percent, respectively.
The declines occurred in a week without a primary market Treasury bill auction, reflecting movements in the secondary market.
In the FGN bond market, average yields edged up by 10 basis points to 16.53 percent from 16.43 percent, as lower yields on shorter-dated securities offset increases at the longer end of the curve.
The two-year bond yield declined by 100 basis points to 16.50 percent, while yields on the 15-year and 30-year bonds rose by 68 basis points and 113 basis points to 15.18 percent and 15.73 percent, respectively.
Beyond the fixed-income market, the naira depreciated by 0.70 percent week-on-week to N1,341.67 per dollar in the Nigerian Foreign Exchange Market (NFEM). The parallel-market rate was comparatively steadier, depreciating by 0.10 percent to N1,376.40 per dollar.
Consequently, the premium between the parallel and official market rates narrowed by 18.65 percent to N34.73 per dollar, from N42.69 in the preceding week.
Nigeria’s gross external reserves also increased by 0.12 percent week-on-week to $55.162 billion, extending their rise above the $55 billion mark to the highest level since December 2008, according to the report.
The external position received additional support from rising crude oil prices, with average Brent crude increasing by 4.27 percent to $111.40 per barrel during the week and briefly exceeding $116 per barrel on October 23 amid escalating tensions in the Middle East.
Globally, government bond yields generally declined, with the 10-year yields on US, Japanese, British and South African government bonds falling by nine, 13, three and seven basis points, respectively. Nigeria’s 10-year bond yield moved in the opposite direction, rising by five basis points to 17.10 percent.
The coming Treasury bill auction will therefore provide a fresh indication of investor demand for government securities as substantial maturities return funds to the financial system, while the CBN’s liquidity management operations continue to influence the amount of money available for investment.
Related News
Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.
