Nume Ekeghe
Nigeria’s banking system is heading into September with a sizeable liquidity cushion, with N15.72 trillion in estimated inflows expected during the month, largely from maturing OMO bills and other securities.
The figure is 16.1 per cent higher than the estimated N13.54 trillion inflow in August and comes after system liquidity jumped 56.17 per cent to N4.65 trillion last month.
This is according to the latest projection by the Financial Markets Dealers Association (FMDA), which stressed that OMO maturities will do most of the heavy lifting in September.
“At N11.60 trillion, they account for about 74 per cent of the expected inflows,” the report said.
It added, “Treasury bills maturities are expected to add N1.255 trillion, while FGN bond coupons will contribute N285.6 billion. FAAC allocations are estimated at N2.5 trillion, with the balance coming from corporate bonds and commercial paper maturities and coupons.”
The numbers suggest that banks should have relatively comfortable funding conditions in the near term. But there is an important catch: the N15.72 trillion will not necessarily stay in the system.
The FMDA said the net liquidity impact would depend on the CBN’s sterilisation stance, particularly as the central bank continues to use OMO operations to manage excess liquidity.
It added, “That is already becoming evident in the market. In August, system liquidity rose from N2.98 trillion to N4.65 trillion as sizeable inflows from maturing securities, FAAC allocations, and other repayments more than offset the CBN’s liquidity mop-up operations. Yet money-market conditions did not simply loosen across the board.
“Treasury bill yields actually rose, with the average yield climbing 73 basis points to 19.21 per cent, while the average FGN bond yield fell 14 basis points to 16.92 per cent. Investor appetite remained strong. Treasury bill bid-to-cover rose to 5.86 times in August from 4.34 times in July, while OMO bid-to-cover increased to 4.62 times from 3.99 times.”
The FMDA said, “Strong investor demand across instruments supported market activity in August and noted that the reopening of OMO auctions to domestic investors had pushed stop rates below the 20 per cent mark. For banks, the immediate picture is therefore one of ample liquidity, but not necessarily cheap money.”