Weekly Market Insights: Global Trends and Local Implications
- Average net system liquidity surged by 71.79% week-on-week to N5.4 trillion, reflecting strong inflows into the system. The liquidity expansion reflects cash returning to the banking system from maturing securities, while the Central Bank refrained from aggressively reissuing OMOs to mop up the excess liquidity. Monthly FAAC allocations also contributed to the liquidity injection into the banking system.
- Liquidity inflows are expected to moderate this week, with about N1.55 trillion projected from maturities, barring additional injections such as CRR refunds.
- Despite elevated oil prices driven by US–Iran geopolitical tensions, the naira weakened slightly across both the NFEM and parallel markets.
- Market sentiment suggests the US dollar strengthened against major currencies, as investors sought safety amid rising global uncertainty.
- Limited liquidity in the official FX market may have contributed to pressures that spilled over into the parallel market.
- Activity in the local bond market dropped sharply, with traded volume declining by over 90% week-on-week, reflecting cautious positioning by investors.
- Yields in the bond market edged higher, consistent with broader movements across global bond markets amid rising inflation expectations linked to tensions between the US and Iran.
