FMDA Reports N10.9 bn Inflow of June Liquidity, Driven by OMO Maturities Dominating Market Outlook

Nume Ekeghe

The Nigerian financial system is expected to receive another surge of liquidity in June, with the Financial Markets Dealers Association (FMDA) estimating an inflow of N10.90 trillion. The bulk of this liquidity is projected to come from Open Market Operations (OMO) maturities.

In its Monthly Market Report, the FMDA projected June inflows to be 3.51 percent higher than the N10.53 trillion recorded in May. OMO maturities were forecast to account for the largest share of the expected liquidity injections.

According to the FMDA, OMO maturities are expected to reach N7.77 trillion in June, representing about 71 percent of total projected inflows. Treasury bill maturities are estimated at N995.81 billion, while Federal Government bond coupon payments are projected at N278.99 billion. The report also estimates FAAC distributions to the federal, state and local governments at about N1.8 trillion.

“Looking ahead, an estimated N10.90 trillion in inflows is projected for June, about 3.51 percent higher than May levels. OMO maturities are expected to account for about 71 percent of total inflows, though the ultimate liquidity impact may be moderated by subsequent CBN sterilisation activities,” the report stated.

The positive liquidity outlook comes despite aggressive monetary management by the Central Bank of Nigeria (CBN) during May. The FMDA noted that average system liquidity rose by 7.76 percent to N5.22 trillion even as the apex bank withdrew an estimated N12.06 trillion through liquidity management operations.

The report said, “Average system liquidity increased by 7.76 percent in May to N5.22 trillion, despite the CBN withdrawing an estimated N12.06 trillion through liquidity management operations during the period.”

In the foreign exchange market, the naira weakened slightly during the month. The FMDA reported that the currency depreciated by 0.64 percent in the Nigerian Foreign Exchange Market (NFEM), despite a significant increase in market activity.

“The naira depreciated marginally in the official market in May, despite total NFEM turnover rising to over $8 billion,” the report added.

FMDA also pointed to improving external reserve dynamics, noting that reserves gained more than $1 billion within about three weeks as proceeds from earlier crude oil exports began to flow into government accounts.

“External reserves increased by more than $1 billion within about three weeks in May, as receipts from earlier crude oil exports and elevated oil prices gradually flowed into the reserve position,” FMDA stated.

In the fixed‑income market, yields were largely stable. FMDA said FGN bond yields were mixed during May, with lower yields at the short end offset by increases across medium and long‑term maturities. Treasury bill yields also remained broadly stable, although three‑month and six‑month instruments recorded modest increases.

“FGN bond yields were mixed in May, with declines at the short end offset by increases across the mid‑ and long‑tenors. Nigeria’s 10‑year bond yield rose marginally to 14.96 percent, broadly in line with developments across global fixed income markets,” the report noted.

The report observed that global bond yields generally trended higher during the month due to persistent inflation concerns and expectations that major central banks would maintain cautious policy positions.

FMDA noted that the gains came despite weaker trading activity, with trade volume and trade value declining by 60.96 percent and 66.55 percent respectively.

Looking ahead, it advised market participants to position portfolios to benefit from elevated liquidity conditions while maintaining prudent foreign exchange risk management.

“Our Take, the report stated, is to, ‘Position portfolios to benefit from elevated liquidity and sizeable June inflows,’ while also monitoring CBN liquidity management operations, which may offset part of the projected inflows.”