NIBOR surges as CBN mops up N4trn from money market

Nigerian Interbank Offered Rate (NIBOR), the benchmark interest rate for short-term, unsecured lending, rose as the Central Bank of Nigeria (CBN) monetary auctions triggered liquidity fluctuation in the money market last week.

The CBN auctions huge OMO bills, and allocates as much as N2.64 trillion across standard tenors as part of an effort to settle expired securities.

According to reports released by investment firms, the financial system liquidity improved to a net surplus position of N2.78 trillion, representing a 31.94% week-on-week increase from the prior week’s N2.11 trillion.

There were inflows from banks parking funds at the CBN window, coupon inflows from government bonds and repayment from matured investment securities.

In its note, Cowry Asset Limited said the improvement was driven primarily by the repayment of N2.2 trillion in Treasury bills maturities, which more than offset liquidity debits arising from N1.06 trillion in Treasury bills auction sales.

The market also recorded N1.3 trillion in OMO bill settlements earlier in the week, which reduced the financial system liquidity.

Notwithstanding the headline surplus, the cumulative liquidity withdrawals from two CBN auctions which was estimated at nearly N4.0 trillion, tightened interbank conditions and triggered an uptick in funding rates, according to Cowry Asset Limited.

The market recorded N2.07 trillion lodgment at the CBN Standard Deposit Facility (SDF), boosting liquidity along primary market repayments of N66.50 billion.

The excess liquidity condition kept the Overnight rate at 22.71%. On Tuesday, the surplus balance improved to N3.77 trillion, buoyed by N1.31 trillion inflow from 20-Jan26 OMO maturity, despite an offset of N108.00 billion borrowing at the CBN’s Standard Lending Facility (SLF).

AIICO Capital Limited revealed that by mid-week, the financial system liquidity switched to a deficit balance, mainly driven by sizable OMO settlement totaling N2.64 trillion, but the pressure was eased slightly due to N91.34 billion coupon inflow from Jan-2042 bond.

Reflecting these liquidity pressures, Nigerian Interbank Borrowing Rate (NIBOR) rose across all tenors, the investment firm said.   The overnight NIBOR increased by 2bps to 22.84% at the close of the week, while the 1-month, 3- month, and 6-month tenors also recorded increases.

On Friday, liquidity opened robustly at N2.78 trillion, driven by N2.66 trillion DMB placements at the CBN SDF window and N29.82 billion coupon payment from 23-Jul 2030 bond.

As such, market liquidity improved week-on week by N673.74 billion as the average funding cost rose by 5bps week on week to 22.65%, with Open Repo Rate (OPR) steady at 22.50%, while the Overnight Rate leaped by 10bps to 22.79%.

The market expects N500.00 billion inflows from the 27 Jan-26 OMO maturity and additional N41.62 billion from the FGN bond coupon payment this week.  These inflows will enhance system liquidity despite projected outflows from an expected FGN bond Primary Market Auction.

Consequently, funding conditions remained elevated, with the overnight funding rate rising by 10bps to 22.79%, while the Open Repo rate remained unchanged at 22.50%.

NITTY yields were broadly higher across the curve, although the 1-month NITTY declined by 6bps to 16.64%. In contrast, the 3-month, 6-month, and 12-month NITTY tenors trended upward, reflecting investor repositioning following the outcome of Wednesday’s primary market auction.

Meanwhile, the secondary market for treasury bills traded on a bearish note, with selective sell-offs across maturities. As a result, the average secondary market yield rose by 37bps week-on-week to 18.50%.

At Wednesday’s NTB primary auction, the CBN offered N1.15 trillion across the standard tenors. Total subscriptions printed at N3.4 trillion, underscoring strong investor appetite, with approximately 98% of bids concentrated in the 364-day tenor.

Ultimately, the CBN allotted N1.1 trillion, translating to a bid-to-cover ratio of 3.24x and a sales-to-offer ratio of 0.92x. Stop rates on the 91-day and 182-day bills increased by 4bps and 15bps to 15.84% and 15.65%, respectively, while the 364-day stop rate eased marginally to 18.36% from 18.47% at the previous auction.

Earlier in the week, the CBN conducted an OMO bills auction on Monday, which also recorded robust investor participation. The apex bank offered N600 billion across the 203-day and 245-day maturities, while total subscriptions reached N2.9 trillion, resulting in a final allotment of N2.6 trillion. Stop rates settled at 19.38% for the 203-day bill and 19.39% for the 245-day bill.

“.. we expect rates to trend marginally lower, supported by a positive system liquidity outlook. Liquidity conditions are expected to be bolstered by an estimated N900 billion in OMO bill maturities alongside anticipated December FAAC inflows.
“However, these inflows may be partially offset by liquidity pressures from the planned FGN bond auction, with over N900 billion in repayments, which could temper the extent of rate moderation.
“While liquidity is expected to remain positive, funding rates may stay elevated relative to recent averages”, Cowry Asset Limited said in its market update.