The final Open Market Operations OMO auction for June 2025 sent a clear signal through the market. The spotlight was on the 260-day bill, which drew staggering bids exceeding twice the offered amount, leading to a compressed stop rate from the previous auction. The strong demand was suggestive of a renewed investor confidence in rate stability, strategic duration positioning, and possibly the re-entry of institutional or offshore interest. In contrast, the shorter bill saw minimal traction, highlighting a growing disinterest in short-term instruments.
The International Monetary Fund (IMF) has continued to commend Nigeria’s bold economic reforms, from subsidy removal to foreign exchange liberalization, naming such reforms as key steps that have strengthened macroeconomic stability and renewed investor confidence.
In the week under review, system liquidity maintained a surplus position, although with notable fluctuations, in particular, there was a sharp mid-week decline followed by a slight recovery by Friday. The money market opened on Friday with a surplus of over ₦460 billion. Consequently, short-term borrowing rates remained stable with mild changes during the week: the Overnight (O/N) rate closed at 27.00% while the Open Repo Rate (OPR) settled at 26.50%, up from the 26.00% and 32.00% levels they featured in the previous week. The Naira traded between a high of $/₦1,533.00 and a low of $/₦1,528.00 on Monday and closed at $/₦1,528.50 on Friday.
At the last OMO auction in June 2025, the Central Bank of Nigeria (CBN) recorded robust investor demand for longer-dated instrument, particularly the 260-day bill, which drew an impressive ₦768.65 billion in bids, more than double the ₦300 billion on offer. The stop rate for this tenor settled at 23.99%, a decline from 24.59% at the previous auction, reflecting strong market appetite and growing confidence in yield stability. The bid range of 23.40% to 24.49% suggests a healthy spread of expectations, but the lower cut-off indicates the CBN’s intent to sterilize liquidity while keeping borrowing costs in check.
In stark contrast, the 113-day bill received minimal interest, attracting just ₦3.00 billion in bids, resulting in no sale. The sharp divergence highlights investors’ reduced appetite for short-term exposure, likely due to reinvestment risk or expectations of yield moderation. The market appears to be shifting toward medium-term certainty, aligning portfolios with the perceived end of the tightening cycle. The outcome points to a clear rebalancing of the yield curve, with the CBN strategically leveraging strong demand at the long end to guide liquidity absorption without reflecting aggressive policy tightening.
Notably, despite a total offer of ₦600 billion across both tenors, the CBN allotted ₦745.40 billion, suggesting a calculated overreach to soak up excess liquidity. The move, though uncharacteristic of the Apex Bank’s typically cautious posture, suggests a pragmatic shift, absorbing as much liquidity as possible while rates remain subdued. It also reinforces the depth of yield hunger among investors in a system awash with cash. Market participants believe the CBN’s actions are hawkish. While the stop rate cut and longer tenor preference point to a dovish tilt, the aggressive liquidity mop-up hints at cautious tightening. This ambiguity has left investors pensive and cautious, navigating a yield environment where policy signals are subtle and timing is everything.
With the Central Bank’s actions not fully aligning with conventional tightening or easing cues, fixed-income players are treading cautiously, wary of locking into positions that may be upended by sudden surprises.
TENOR | AUCTION DATE | OFFER (₦’ B) | BIDS (₦’ B) | RANGE OF BIDS (%) | STOP RATES (%) | PREVIOUS STOP RATES (%) | TOTAL SALE (₦’ B) |
113-DAY | 30-06-2025 | 300.00 | 3.00 | 24.0700-24.0700 | No Sale | 24.2000 | No Sale |
260-DAY | 30-06-2025 | 300.00 | 768.65 | 23.4000-24.4900 | 23.9900 | 24.5900 | 745.40 |
Within the context of monetary policy, the June 30, 2025 OMO auction outcome suggests a dovish policy signal:
Nigeria’s financial system maintained a healthy liquidity surplus throughout the week, although with notable shifts in flow. The week opened strong on Monday, June 30th at ₦1.28 trillion, likely boosted by end-of-month Federation Account Allocation Committee (FAAC) inflows. However, by Tuesday, liquidity had begun to taper, falling to ₦980.86 billion, and its sharp descent continued midweek, bottoming out at ₦468.52 billion on Friday.
Despite the drop from Monday’s peak, the system’s consistent surplus likely kept overnight and short-term interbank rates stable, with limited upward pressure. Where the current pace of liquidity depletion continues into this week, we may see a tightening in short-term funding rates except the CBN steps in with targeted interventions. As Q3 begins, investors’ focus will remain on how monetary policy and debt market operations interact to shape funding conditions and broader yield curve dynamics.
Safe haven currencies have long been the preferred refuge for investors during periods of global uncertainty, offering protection against market volatility and value erosion. Traditionally anchored by strong economies and stable financial systems, currencies like the U.S. dollar, Swiss franc, and Japanese yen tend to outperform riskier assets, such as equities or currencies of emerging markets, when economic outlooks dim. However, recent developments have shown that even safe haven currencies are not without vulnerabilities. Moody’s downgrade of the U.S. sovereign credit rating from Aaa to Aa1 has stirred fresh concerns about long-term debt sustainability. This was underscored by a surge in the 30-year U.S. Treasury yield to 5.08%—a level not witnessed since the Great Depression, and weak investor interest at a recent $16 billion auction of 20-year bonds.
For Nigeria, these signals hold significant implications. Rising U.S. yields can drive capital away from emerging markets, exerting downward pressure on the naira and reshaping the dynamics of local debt markets. Where investor risk aversion continues to mount, the CBN could face growing pressure to either adopt a hawkish stance to defend the currency or take a dovish path to support economic activity. The balance it strikes will be crucial in determining the direction of Nigeria’s fixed income market in the months ahead, especially as global monetary tightening collides with domestic fiscal realities.
Nigeria’s fixed-income market has experienced a steady decline in bond yields across tenors in H1 2025, with the 5-year FGN APR 2029 dropping from 21.79% in January to 17.75% by June, reflecting stronger investor demand, improved liquidity, and growing expectations of monetary easing. While bond prices, which move inversely to yields, are rising, due to increased demand from investors. If this downward trend persists into Q3, it could lower government borrowing costs, attract more institutional inflows, and drive bond price appreciation. Conversely, it also narrows the window for locking in high yields, prompting investors to reassess duration strategies. Sustaining this momentum will depend heavily on inflation control, currency stability, and clear policy direction from the Central Bank of Nigeria.
In its 2025 Article IV Consultation Report, the IMF commended Nigeria’s recent reforms, such as; fuel subsidy removal, ending central bank deficit financing, and FX market liberalization, as tools which boosted macroeconomic stability and investor confidence. These reforms supported Nigeria’s return to the Eurobond market and improved portfolio inflows.
The report noted that GDP grew by 3.4% in 2024, driven by stronger oil output and a resilient services sector, with similar growth expected in 2025. External reserves and the current account position also improved, while inflation eased to 23.7% in April 2025, aided by better food supply and a tighter monetary policy. However, the IMF flagged rising risks, including persistent poverty, food insecurity, and vulnerabilities from lower oil prices, high borrowing costs, and domestic security challenges.
To strengthen Nigeria’s capital market, the IMF urged a disciplined fiscal approach, including a realistic 2025 budget aligned with lower oil revenues, improved revenue mobilization, and targeted social spending. Sustained reforms such as subsidy removal and enhanced tax administration are key to maintaining investor confidence and expanding market depth.
On the monetary side, the IMF emphasized the need for tight policies, positive real interest rates, and flexible exchange rate management to anchor inflation and stabilize the naira. Continued bank recapitalization, Basel III implementation, and fintech regulation are also vital for preserving financial stability and enhancing market resilience.
The Nigerian All-Share Index (ASI) maintained a modest upward trend in the first trading week of July, rising from 119,978.57 points on Monday, June 30 to 120,977.20 points on Thursday, July 3, reflecting a 0.84% gain over the period. Although the market dipped slightly on July 1 to 119,741.23 (-0.20%), it rebounded on July 2 to 120,339.90 (+0.50%), and extended gains on July 4. This steady performance is suggestive of improving investor sentiment and selective repositioning in anticipation of Q3 economic and corporate earning disclosures.
Oil prices eased this week, pressured by renewed supply concerns and uneven demand signals. Brent crude closed at $68.23 per barrel, while WTI settled at $66.40, marking two consecutive sessions of decline. The slump was triggered by a surprise 3.85 million barrel increase in U.S. crude inventories; the highest in three months, which defied expectations of a drawdown and underscored weak consumption patterns in the world’s top oil market.
Supply-side anxiety intensified as OPEC+ confirmed plans to raise its output by 411,000 barrels per day in August, pushing the group’s total 2025 production increase to 1.78 million bpd, which is over 1.5% of global demand, raising fears of a potential glut. Geopolitical risks, including Iran’s decision to cut cooperation with the UN nuclear watchdog and fresh U.S. sanctions on its oil-linked networks, injected some short-lived volatility, but lacked the supply disruption needed to sustain price gains. A recent US-Vietnam trade agreement offered some support, yet uncertainty remains elevated as major economies like the EU and Japan face a looming July 9 tariff deadline without finalized trade deals.
However, both crude benchmarks are closed the week in positive territory, Brent up by over 2% and WTI by more than 1%, recovering from their worst weekly drops in over two years. While prices have firmed modestly over the past month, year-on-year levels remain over 20% lower, reflecting the oil market’s ongoing struggle with oversupply and fragile global demand fundamentals.
Nigeria’s evolving macroeconomic landscape signals cautious optimism for its capital markets, with recent monetary operations and IMF commendations reinforcing the case for renewed investor confidence. The robust demand for long-tenor instruments at the June OMO auction, paired with a declining stop rate and massive oversubscription, reflects strategic duration positioning by investors who appreciate the opportunity in yield stabilization. As liquidity remained surplus throughout the week, despite fluctuations, money market rates remained elevated but relatively steady, suggesting a central bank balancing act between sterilizing excess liquidity and avoiding aggressive tightening. The gradual decline in FGN bond yields across tenors in H1 2025 also indicates investor expectations of a potential shift toward a more accommodative policy stance.
Looking ahead, a successful exit from the Financial Action Task Force’s (FATF) grey list could unlock a further upside for Nigeria’s capital markets. Such a move would signal improved financial transparency and regulatory compliance, reducing the perceived risk and lowering the barrier for foreign institutional investors. Further, it could drive increased portfolio flows into fixed income and equities, widen investor participation, and enhance Nigeria’s sovereign credit narrative in global markets.
The Debt Management Office (DMO) is expected to release its Q3 2025 issuance calendar. With yields having softened ahead of the new quarter, investors are closely watching for clarity on issuance sizes and scheduling. Analysts anticipate that the current issuance rhythm will continue, especially as the market has witnessed consistent oversubscription and declining yields in recent auctions. This momentum is expected to persist in the lead-up to quarterly fiscal inflows.
The depreciation of the naira and soaring cost of living forced the IMF to offer words of reform – sharp, calculated, and often difficult to swallow. They shout from the rooftops:
“Cut the excess. Curb the greed and government spending. Remove fuel subsidies. Float the naira. Raise taxes.”
Our leaders nod, prices rise, and the people groan under the weight of change. The journey is rough.
Yet, there is hope, they say, there is light at the end of the tunnel… They bite their tongues, hold their breath, and keep moving.
With gritted teeth and uncertain steps, they march forward — pain in their bones, but defiance in their smiles.
“We’ve got this,” they whisper to themselves.
The IMF sees promise: a growing economy, rising investor confidence, and a market ripe for foreign capital.
But one question lingers in the streets, not in reports:
Has it impacted the masses?
Have prices fallen?
Are our leaders tempering reform with compassion?
Time will tell.
By: Sandra A. Aghaizu
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