Money Market Review and Outlook

In a typical manner, activities in the Nigerian market this week was defined by movement of liquidity levels in the financial system on the several trading days during the week. Consequently, after the CBN's forex intervention refund and the Treasury Bills (T-Bills) maturity that hit the system late last week, liquidity in the financial system opened the week at N1.0tn on Monday. Following this, Open Buy Back (OBB) and Overnight (O/N) rates closed 0.3% and 0.4% lower on Monday to settle at 0.9% and 1.2% respectively. However, as the CBN embarked on an Open Market Operation (OMO) mop-up worth N85.3bn on Tuesday, money market rates trended higher to 1.8% (OBB) and 2.1% (O/N)  while average NIBOR settled at 8.0%.

Upon OMO maturity worth N250.0bn on Thursday, OBB, O/N and average NIBOR rates flipped lower to 1.6%, 1.2% and 7.3% respectively. Similarly, as there were no significant outflows from the system, OBB settled at 0.8% while O/N closed at 1.2% for the week.

Performance of the Treasury Bills market was mixed this week. Given the rise in liquidity on Monday, average yields fell to 6.0% from 6.3% recorded in the previous Friday. Nonetheless, against changes in liquidity levels, average Treasury Bills ended the week at 5.9%, down 0.4% W-o-W. Notwithstanding the Treasury Bills maturities next week, we expect the credit from the Debt Management Office (DMO) January bond auction to shrink liquidity levels.  Consequent on this, we expect a marginal rise in money market rates and Treasury Bills yields next week.