June 10,2025/InvestmentOne Report

The financial system liquidity was optimal in May 2025 as liquidity catalysts from various sources kept interbank lending rates relatively stable. Specifically, inflows from FGN bond coupon payments, substantial OMO maturities and FAAC disbursements offset funding pressure from primary market auction settlements, CRR debits, and FX settlements. As such, the Open Buy Back and Overnight lending rates averaged 26.68% and 27.17% respectively, compared to 26.81% and 27.23% respectively in April 2025. Although the central bank attempted to mop up excess system liquidity and attract FPI inflows by conduction multiple OMO auctions, this proved to be insufficient as financial conditions remained relatively buoyant. The Monetary Policy Committee (MPC) also maintained benchmark interest rates at 27.50%, reflecting sustained contractionary policy stance despite the moderation in inflation. 

For the month of May, we expect a tepid performance across the treasury bills and bond market, with little to no change in yields. This should be driven by market liquidity conditions, CBN policy decision and DMO’s borrowing appetite in the period. We expect stop rates at the primary market auctions to print around similar levels as seen from recent auctions, with investors’ aiming for higher rates, while the debt authorities try to manage the costs of borrowing. At the secondary market, we envisage mixed trading sessions, as investors continue to trade cautiously in the market.

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