Monthly Money Market Performance: Another month of sizable liquidity ahead!


In Sept-2020, financial system liquidity improved compared to the previous month, as the effect of naira inflows outweighed naira outflows. Naira inflows were in the form of FAAC credits, OMO maturity and Bond coupon payments which outweighed outflows via CRR debits as well as OMO sales. Overall, the monthly average interbank funding rates (OBB &O/N rate) settled at 3.7% in September-2020 relative to 8.1% in August 2020.

In terms of primary money market activities, the CBN mopped up just 17.2% of the N1.2tn worth of OMO bills that matured during the month. Similarly, the CBN on behalf of the FG successfully only rolled over c. 91.3% of FG’s maturing Treasury bills worth N460.8bn at a lower average stop rate of 1.87% (July-2020: 2.01%).

Nigerian sovereign yields decline m/m thanks to buoyant financial liquidity in Sept-2020

Nigerian Sovereign Yield Curve as at Month End
Sources: FMDQ, United Capital Research

Thanks to the sizable liquidity that characterized the period we continue to see interest at the secondary NTB market in Sept-2020. Notably, the average NTB yield dipped to 1.85% vs 2.02% in August-2020. Also, we saw bullish sentiments in the OMO market as average yield dropped to 1.86% (vs. 3.12% in August-2020).

In October-2020, we expect about N1.7tn worth of OMO maturity to hit the financial system. However, we expect system liquidity to remain moderate (similar to that of Sept-2020) on the expectation that the CBN will continue to use CRR penalty debit alongside new OMO issuance to control the size of liquidity in the financial system.