Fixed Income Trading Falls 37% to ₦25.81trn in October as OMO Turnover Slows

OMO Did Most of the Damage

The October slowdown was concentrated in one instrument. OMO bills, the central bank's liquidity management paper, accounted for ₦16.75 trillion of the ₦25.81 trillion traded, and their ₦11.30 trillion month on month drop explains almost three quarters of the market's total decline. Their share of turnover slipped only modestly, to 64.9% from 68.3%, which shows the pullback was market wide rather than a rotation out of central bank paper into other instruments.

The smaller segments tell the same story at different speeds. FGN bonds fell the least in percentage terms, and their participant count barely moved, slipping to 24 from 25. Treasury bills lost more than a third of their traded value, with deals down to 1,435 from 2,227, while Sukuk was the most resilient line, easing 12.4% to ₦58.53 billion. Across the market, active participants dipped to 29 from 30: dealers stayed present but did smaller business.

Fewer New Bills Meant Less to Trade

Secondary turnover follows primary supply with a short lag, and October's primary calendar contracted hard. Total allotments across Treasury bills, OMO bills and FGN bonds fell to ₦9.501 trillion from ₦21.527 trillion in September, according to the FMDA's October market report. OMO issuance drove that fall, dropping to ₦6.182 trillion from ₦17.510 trillion, while FGN bond issuance was the only category to rise, up 25.70% to ₦2.010 trillion.

The sequence matters. September's heavy OMO sales withdrew cash and gave dealers fresh paper to trade into October. When the central bank eased that pace, maturing bills returned cash to holders instead of being replaced, and the stock of recently issued, actively traded paper shrank. Liquidity sitting in bank balances does not generate secondary trades. Paper does, and there was less of it.

A Supply Story, Not a Demand Story

Nothing in the October data points to investors refusing Nigerian paper. At the final Treasury bills auction of the month, on October 28, subscriptions reached ₦1.908 trillion against an ₦800 billion offer, yet the Debt Management Office allotted only ₦71.16 billion. Yields moved in the direction of scarcer supply rather than weaker appetite: the OMO closing yield fell more than a percentage point during the month, and bonds traded at lower turnover without a sell off in price.

That distinction decides how to read the 37% headline. A demand led fall in turnover, with yields rising, would signal stress in the government's funding market. A supply led fall, with yields falling and auctions still covered more than twice over, signals a central bank that chose to return cash in October after absorbing heavily in September. Turnover should recover in any month the allotment calendar expands again, and the level of OMO issuance, not investor sentiment, is the variable that will set it.