There are expectations that system liquidity will remain robust, primarily driven by inflows from Treasury bills (T-bills) maturities amounting to N374.7 billion.
These inflows are expected to surpass the outflows from the bond auction, which will likely stand at N180.00 billion.
According to dealers from Lagos-based investment banking and research company, Afrinvest, this positive liquidity balance should lead to further moderation in inter-bank lending interest rates, unless the Central Bank of Nigeria (CBN) intervenes through sterilisation activities.
As banks continue to access the Standing Lending Facility (SLF) to meet liquidity demands, the market could experience a more stable interest rate environment in the near term according to dealers.
In addition to the stable liquidity outlook, the secondary market is anticipated to experience a mildly bullish performance. Investors are expected to focus on opportunities along the yield curve, taking advantage of favorable rates as they navigate through market trends.
The demand for short-term instruments, particularly T-bills, is likely to drive investor interest, contributing to upward momentum in the secondary market. This increased activity could result in slight downward pressure on yields, as liquidity improves.
In the penultimate week, Nigerian banks faced heightened liquidity pressures, prompting significant borrowings from the CBN’s SLF. The liquidity injections, coupled with Open Market Operations (OMO) and Nigeria Treasury Bills (NTB) repayments, helped stabilise the banking sector despite ongoing outflows.
With the expectation of stronger system liquidity in the coming week, these measures are expected to continue supporting the banking sector’s operations, particularly as they work to balance inflows with bond auction outflows.
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