FMDA projects Nigeria’s liquidity inflows to drop 31% to N2.47 trillion this week

The Financial Markets Dealers Association (FMDA) predicts a 31% decrease in Nigeria's financial-system liquidity inflows to N2.47 trillion this week, down from N3.56 trillion the previous week. This drop occurs as the Central Bank of Nigeria's Monetary Policy Committee begins its two-day meeting, with analysts anticipating the bank to keep its benchmark rate steady.

Of this week's projected inflows, OMO maturities will make up 91.8%, amounting to N2.27 trillion, a 25.8% decline from N3.06 trillion. Corporate bond coupons and commercial paper maturities are expected to fall by 76.1% and 35.0% respectively, with no expected inflows from FGN bond maturities, corporate bond maturities, or FAAC disbursements.

Despite this projected decline, system liquidity actually increased by 15.97%, reaching N2.86 trillion from N2.46 trillion, as N4.45 trillion entered the financial system. The recent bond yield trends showed mixed results, with the 4-year FGN bond yield falling sharply by 1.73 percentage points to 16.60% and the 15-year bond rising by 1.60 percentage points to 16.35%.

Analysts expect the MPC to maintain the 26.5% rate at this week's meeting, but some suggest a potential change in tone. In July, the CBN held the MPR at 26.5% for two consecutive meetings, with Governor Olayemi Cardoso citing Middle East tensions as the reason for a cautious approach. With OMO maturities still leading the liquidity calendar and inflation showing a slow downward trend, the MPC's decision this week will provide insight into whether the CBN will start broad easing or continue to hold steady amid oil-price shocks and pre-election liquidity risks.