Nigeria’s banking system is set to receive an estimated ₦2.858 trillion in fresh liquidity this week, driven largely by maturing Open Market Operations (OMO) bills, Treasury bills and other primary-market repayments, according to the Financial Markets Dealers Association (FMDA).
The FMDA weekly market report projects ₦2.067 trillion from OMO maturities, ₦392.79 billion from Treasury bill maturities and ₦349.84 billion from Federal Government of Nigeria (FGN) bond coupon payments. Additional inflows of about ₦42.87 billion from commercial paper maturities and ₦5.25 billion from corporate bond coupons are also expected.
FAAC and Bond Auction in Focus
A potential ₦2.43 trillion Federation Account Allocation Committee (FAAC) disbursement to the federal, state and local governments is flagged as another major source of system liquidity. On the other side of the ledger, the main scheduled drain is the Debt Management Office’s ₦1.75 trillion FGN bond auction, involving the reopening of the February 2034, September 2036 and June 2038 bonds.
Liquidity Already Surged Last Week
Banking system liquidity rose sharply in the previous week, climbing 69.39% to ₦6.283 trillion from ₦3.709 trillion. The increase was driven mainly by ₦2.409 trillion in OMO maturities with no offsetting OMO sale alongside ₦80.84 billion in Treasury bill maturities and ₦30.20 billion in other primary-market repayments. A ₦269.06 billion Treasury bill sale by the DMO only partially offset those inflows.
Reserves, Oil and the Naira
Gross external reserves edged up 0.02% week-on-week to $55.089 billion, a fresh high since December 2008. Average Brent crude prices rose 3.92% to $106.02 per barrel over the same period.
The naira weakened slightly by 0.06% to ₦1,332.31 per dollar at the Nigerian Foreign Exchange Market (NFEM), while the parallel market rate held steady at ₦1,375. NFEM interbank turnover increased 14.08% to $1.08 billion.
Fixed-Income Yields Climb
Average FGN bond yields rose 32 basis points to 16.43%. The two-year yield jumped 142 basis points to 17.50%, the seven-year yield increased 61 basis points to 17.04%, and the 10-year yield rose 46 basis points to 17.05%. The 30-year yield was the exception, falling 60 basis points to 14.60%.
Treasury bill yields also moved higher on average, up seven basis points to 18.23%. Shorter tenors led the increase, while the six-month and 12-month yields eased.
At the 14 October primary market auction, the DMO allotted ₦269.06 billion against a reduced offer of ₦450 billion. Stop rates held at 15.50% for the 91-day bill and 15.80% for the 182-day bill, while the 364-day rate rose five basis points to 15.90% its first increase since August. The FMDA described the move as a pause in the post-MPR rate-cutting trend.
What It Means for Markets
If the projected inflows materialise, short-term funding pressures in the banking system could ease. At the same time, the large FGN bond auction and the recent rise in yields may still shape naira liquidity and the cost of borrowing. Market participants will be watching how banks deploy the extra cash and how much of it is absorbed by the government’s borrowing programme in the days ahead.
