N10.55trn to hit financial markets in March as liquidity jumps 22.5%

An estimated N10.55 trillion in inflows is projected to enter Nigeria’s financial system in March, about 22.5 percent higher than February’s N8.61 trillion, according to a new report by the Financial Markets Dealers Association (FMDA).

The surge is expected to significantly lift system liquidity, with Open Market Operation (OMO) maturities accounting for nearly half of the total injections. The report noted that the overall impact on liquidity conditions and the naira will depend on reinvestment behaviour, possible sterilisation actions by the Central Bank of Nigeria (CBN), global developments and fiscal injections.

“System liquidity is forecast to rise sharply in March 2026 as total estimated inflows climb to N10.55 trillion from N8.61 trillion in February, driven largely by higher treasury bills and OMO maturities as well as sustained FAAC disbursements to the three tiers of government,” FMDA analysts said.

Treasury bills maturities are expected to rise significantly to N2.84 trillion in March from N1.43 trillion in February, signalling a substantial boost in cash returning to the financial system. OMO maturities are projected to increase to N5.24 trillion in March compared with N4.61 trillion in February, reinforcing expectations of elevated liquidity across money markets.

FGN bond coupon payments, however, are projected to moderate. Coupon inflows are estimated at N285.60 billion in March, lower than the N448.96 billion recorded in February. There are no FGN bond maturities scheduled for either month.

In the corporate debt segment, coupon payments on corporate bonds are expected to rise sharply to N16.47 billion in March from N6.85 billion in February, while corporate bond maturities are projected to decline to N3.00 billion from N12.00 billion over the same period.

Commercial paper maturities are forecast at N189.52 billion in March, up from N129.59 billion in February, further contributing to liquidity conditions in the market.

Statutory allocations from FAAC to the federal, state and local governments are projected at N1.98 trillion in March, slightly higher than the estimated N1.97 trillion distributed in February, providing additional liquidity support across the economy.

Read also: How FMDA is preparing financial markets for next growth phase

 

Altogether, the N10.55 trillion projected for March comprises N2.84 trillion in treasury bills maturities, N5.24 trillion in OMO maturities, N285.60 billion in FGN bond coupons, N16.47 billion in corporate bond coupons, N3.00 billion in corporate bond maturities, N189.52 billion in commercial paper maturities and N1.98 trillion in FAAC disbursements. This compares with February’s cumulative inflow of N8.61 trillion, made up of N1.43 trillion in treasury bills maturities, N4.61 trillion in OMO maturities, N448.96 billion in FGN bond coupons, N6.85 billion in corporate bond coupons, N12.00 billion in corporate bond maturities, N129.59 billion in commercial paper maturities and N1.97 trillion in FAAC allocations.

The liquidity wave comes as fixed-income markets react to the CBN’s recent rate cut. According to FMDA, FGN bonds and treasury bills rallied following the decision, with yields declining across all maturities. The strongest compression was observed at the belly of the curve, particularly in the three- to seven-year segment and long-end bills, reflecting improved sentiment and expectations of a more accommodative policy stance.

Average bond yields declined by 95 basis points to 15.86 percent, while average treasury bill yields fell by 85 basis points to 17.40 percent, supported by renewed demand and improved liquidity conditions. The moderation in domestic yields aligns with softer global bond yields, as the U.S., UK and several emerging market peers also recorded declines in February.

Equities extended their advance during the period. The NGX All-Share Index climbed 16.61 percent in February, building on January’s gains and reflecting strong bullish momentum. Market capitalisation rose 16.59 percent to N123.76 trillion, supported by renewed investor confidence and sustained buying interest.

Trading activity improved significantly, with volume up 22.06 percent and value surging 134.48 percent, indicating stronger liquidity and participation. The sharp rise in the number of deals, which increased 55.15 percent, further confirms broad-based market engagement and improved sentiment across equities.

On global developments, the report noted that geopolitical tensions have continued to provide a buffer for the naira through rising oil prices. With the escalation between the U.S. and Iran and the potential for disruption at the Strait of Hormuz, oil supply risks could sustain prices above $100 per barrel, offering temporary support to FX earnings and reserves.

However, global trade and tariff uncertainties persist. After the U.S. Supreme Court rejected former President Donald Trump’s broad global import tariffs, a new 10 percent tariff was introduced on all imports entering the U.S. The uncertainty, among other factors, has prompted some Nigerian exporters to consider alternative markets such as China.

For member banks and discount houses, FMDA said declining yields are likely to increase mark-to-market gains on bond and treasury bill portfolios. Strong liquidity conditions are expected to support demand for short-dated government securities, while a lower policy rate may compress lending yields but encourage credit expansion.

Abundant liquidity may also reduce deposit competition pressures. However, FX volatility risks remain should geopolitical tensions escalate. The large inflows projected for March could create reinvestment risk if yields continue to compress.

Liquidity conditions remain supportive in the near term, particularly with N10.55 trillion projected to hit the system in March. While FX stability is improving, oil-driven gains remain vulnerable to geopolitical developments. The current policy environment points to the beginning of an easing cycle, with inflation projected to continue moderating, making positioning ahead of the shift crucial for investors and financial institutions.