Banking System to Receive ₦2.59trn From OMO and Treasury Bill Maturities as Funding Rates Ease

Cash Arriving on Top of Cash

The maturity calendar, not new borrowing, is doing the work in the money market this week. Analysts at Cowry Asset Management and Cordros Research both expect inflows of about ₦2.59 trillion, split between ₦2.02 trillion of maturing OMO bills and ₦572.55 billion of maturing Treasury bills. The money lands in a system that hardly needs it: banking system liquidity closed on Friday at ₦7.37 trillion, and Monday's session still left the system in a deep surplus even as the balance moderated.

That sequencing matters for pricing. When maturities of this size hit an already liquid system, the first place the effect shows up is the secondary market, where banks and funds compete for a limited stock of short dated paper. Buying was already visible on Monday, concentrated in the short and middle sections of the Treasury bill curve, and it pulled the average bill yield down to 17.9%. OMO yields moved the same way, easing to an average of 18.6%, while bonds followed more slowly at 16.2%.

Funding Costs Are Drifting Lower

Overnight money is also getting cheaper at the margin. The overnight rate fell 13 basis points to 20.25% on Monday, even though liquidity tightened slightly on the day, while the Open Repo Rate was unchanged at 20.00%. Funding rates near 20% remain high in absolute terms, but the direction is consistent with a market where lenders have more cash than borrowers need on any given day.

For banks, the practical question is placement. Surplus balances earn little sitting idle, and the Standing Deposit Facility absorbed record sums in October. Each maturity inflow that is not sterilised pushes more cash toward the same set of outlets: secondary bills, the next primary auction, or the central bank's deposit window.

The Sterilisation Question Decides the Yield Path

How far yields fall from here depends less on the ₦2.59 trillion arriving than on how much of it the Central Bank of Nigeria (CBN) takes back out. The October pattern is instructive: the CBN repaid ₦10.69 trillion on maturing securities during the month against ₦7.49 trillion raised at fresh auctions, a net injection that helped keep system liquidity elevated. Analysts note that fresh OMO issuance could again absorb part of this week's inflows, and the Debt Management Office's primary market activity will compete for the same cash.

If the CBN repeats October's lighter mop up stance, bill yields have room to grind lower from 17.9%, and the pressure will show up first at the short end where Monday's buying was concentrated. If it moves aggressively instead, the maturity inflows become a refinancing exercise rather than new stimulus, and yields stabilise near current levels. Wednesday's Treasury bill auction and any OMO offer this week will give the first clear read on which way the central bank intends to lean.