Nigeria’s money market is expected to experience a significant surge in liquidity this month, with the Financial Markets Dealers Association (FMDA) forecasting total inflows of N10.53 trillion in May 2026.
The projection, contained in the FMDA’s Monthly Market Report released on Tuesday, May 5, represents a notable increase from the N9.08 trillion recorded in April. The sharp rise is primarily attributed to a heavy schedule of Open Market Operations (OMO) maturities.
Key Drivers of May Inflows
According to the report, OMO maturities will dominate the liquidity injection, expected to reach N7.17 trillion, up from N5.88 trillion in April. This will be supplemented by other major sources:
– Treasury Bills redemptions: Projected at N1.05 trillion, higher than April’s N722.72 billion.
– FAAC allocations: Estimated at N1.8 trillion, slightly lower than the N2.04 trillion disbursed in April.
– FGN Bond coupon payments: N346.14 billion (no bond maturities scheduled for the month).
The corporate debt segment is also expected to contribute meaningfully, with corporate bond coupon payments rising sharply to N95.09 billion from N19.92 billion in April. Corporate bond maturities will add another N10.45 billion, while commercial paper maturities are forecast at N59.50 billion.
Market Implications
Analysts believe the substantial liquidity build-up could exert downward pressure on interest rates and yields in the fixed income market, potentially leading to yield compression and encouraging portfolio rebalancing by investors.
The sustained high inflows reflect the dominant role of OMO bills and Treasury instruments in shaping liquidity conditions in Nigeria’s financial system. While this environment may support government borrowing costs in the short term, it could also challenge the Central Bank of Nigeria’s efforts to manage excess liquidity through sterilization tools.
The FMDA noted that April already saw stronger-than-expected inflows of N9.08 trillion against a projection of N8.84 trillion, indicating that liquidity conditions have remained robust heading into May.
Market participants will be closely watching how this liquidity wave influences Treasury bill auctions, bond market performance, and overall investment flows in the coming weeks. With no FGN bond maturities scheduled, coupon payments are expected to provide steady cash to institutional investors such as pension funds and asset managers.
