₦11tn Liquidity Set to Enter Nigeria’s Fixed Income Market in October

Nigeria’s fixed income market is set to receive about ₦11 trillion in liquidity inflows in October, with analysts at Cordros Capital projecting that the funds could strengthen reinvestment demand for Treasury bills and bonds and place further pressure on yields.

The projected inflows comprise ₦9.05 trillion from Open Market Operations (OMO) maturities, ₦1.30 trillion from Nigerian Treasury Bills (NTBs) and ₦650.67 billion in Federal Government of Nigeria bond coupon payments.

Cordros Capital disclosed this in its September 2026 Fixed Income Monthly Review, noting that the concentration of maturities could provide substantial liquidity for investors looking to reinvest in fixed income securities.

OMO maturities account for about 82 per cent of the projected October inflows, making the Central Bank of Nigeria’s response through fresh OMO issuance a major factor that could determine how much liquidity remains available in the financial system.

The investment firm expects the returning funds to sustain demand across fixed income instruments, particularly at the short end of the market.

However, it said fresh OMO and NTB auctions could absorb a significant portion of the liquidity, limiting the extent to which yields decline.

The outlook follows a strong September performance in the fixed income market, when ₦13.14 trillion in maturing OMO securities fuelled reinvestment demand.

Cordros said average banking system liquidity rose to a net long position of ₦4.30 trillion in September, compared with ₦4.12 trillion in August.

The increased liquidity coincided with declines across key money market and fixed income yields.

The overnight rate fell by 174 basis points to 20.4 per cent, while aggregate Treasury bill yields declined by 124 basis points to 18 per cent.

Similarly, average OMO secondary market yields dropped by 150 basis points to 18.8 per cent, while the average OMO stop rate fell by 205 basis points to 17.80 per cent from 19.85 per cent in August.

The Federal Government bond market also recorded a decline in average yields, which fell by 108 basis points to 15.9 per cent.

Demand for Treasury bills remained particularly strong during the period, with the Debt Management Office receiving ₦10.22 trillion in bids against ₦2.05 trillion offered during September before allotting ₦2.42 trillion.

The long end of the Treasury bill auction recorded a bid-to-offer ratio of 10.2 times, reflecting strong investor appetite.

Cordros linked the broader fixed income rally partly to the Central Bank of Nigeria’s September 22 decision to cut the Monetary Policy Rate by 350 basis points, from 26.5 per cent to 23 per cent.

Despite the expected October liquidity, Cordros said several factors could limit further declines in yields.

The firm expects inflation and fresh government borrowing to remain important considerations for investors, while the CBN’s continued use of OMO auctions could sterilise part of the liquidity returning to the banking system.

Cordros forecasts September inflation at 15.40 per cent, marginally higher than the 15.39 per cent recorded in August, a development it believes could limit the room for further monetary policy easing.

Fresh NTB and OMO issuance could also compete with existing fixed income securities for available liquidity.

Meanwhile, foreign investor demand is expected to provide additional support for Nigerian bonds and Treasury bills following Nigeria’s inclusion in the JPMorgan GBI-EM Edge index.

Cordros noted, however, that the inclusion does not amount to Nigeria’s return to the flagship GBI-EM Global Diversified index, meaning the passive foreign inflows may be smaller than those associated with a full re-entry.

With about ₦11 trillion expected to flow back into the financial system in October, the interaction between maturing securities, fresh government borrowing, CBN sterilisation and investor demand will determine the direction of Nigeria’s fixed income market.

Cordros therefore expects liquidity and foreign demand to remain supportive of bonds and Treasury bills, while inflation, new issuance and monetary policy operations could moderate the extent of any further decline in yields.