Nigeria’s Bond and Treasury Bill Markets Face ₦11tn Liquidity Wave in October

Nigeria’s Fixed Income Market Set for ₦11tn October Liquidity Boost - Cordros

Nigeria’s fixed-income market is expected to receive about ₦11 trillion in liquidity inflows in October 2026, with maturing Open Market Operations (OMO) securities accounting for the bulk of the funds, according to Cordros Capital.

/ You Might Also Like /

The projected inflows could sustain reinvestment demand for Treasury bills and bonds and place further downward pressure on yields, although fresh OMO and Nigerian Treasury Bill (NTB) issuance by the Central Bank of Nigeria and the government could absorb a significant portion of the returning liquidity.

OMO Maturities Account for Majority of Expected Inflows

According to Cordros Capital’s September 2026 Fixed Income Monthly Review, OMO maturities will contribute ₦9.05 trillion to the October liquidity inflow, representing about 82% of the projected total.

NTB maturities are expected to contribute another ₦1.30 trillion, while FGN bond coupon payments are projected at ₦650.67 billion.

Together, the three sources are expected to inject approximately ₦11 trillion into the financial system during the month.

The scale of the OMO maturities means the timing of repayments and the CBN’s response through fresh securities issuance will play a major role in determining how much liquidity remains available for reinvestment.

September Rally Provides a Guide

September demonstrated the potential impact of large maturity payments on Nigeria’s fixed-income market.

Cordros said ₦13.14 trillion in maturing OMO securities supported reinvestment demand during the month, while average banking-system liquidity increased to a net-long position of ₦4.30 trillion from ₦4.12 trillion in August.

The increase in liquidity coincided with declines across several money-market and fixed-income yields.

The overnight rate fell by 174 basis points to 20.4%, while average Treasury bill yields declined by 124 basis points to 18.0%. Average OMO secondary-market yields fell by 150 basis points to 18.8%, while the average OMO stop rate declined by 205 basis points to 17.80% from 19.85% in August.

Average FGN bond yields also declined by 108 basis points to 15.9%, although demand for bonds remained weaker than demand for Treasury bills.

Lower Policy Rate Supports Fixed-Income Demand

The September fixed-income rally also followed the Monetary Policy Committee’s decision to reduce the Monetary Policy Rate by 350 basis points.

The committee cut the benchmark rate from 26.5% to 23% on September 22, providing additional support for fixed-income securities.

Lower policy rates can reduce the return demanded by investors on newly issued securities, although the eventual movement in market yields depends on liquidity, inflation expectations, government borrowing and investor demand.

Cordros expects the October liquidity inflow to support continued demand for Nigerian bonds and Treasury bills, particularly at the shorter end of the market.

Fresh Issuance Could Absorb Much of the Liquidity

Despite the expected ₦11 trillion inflow, Cordros does not expect all of the returning liquidity to remain available in the financial system.

The CBN and government are expected to conduct fresh OMO and NTB auctions, which could absorb a substantial portion of the funds released by maturing securities.

The balance between maturing instruments and new issuance will therefore determine the ultimate liquidity impact on the market.

Government borrowing requirements will also compete for available funds, potentially limiting the extent to which excess liquidity pushes yields lower.

Treasury Bill Demand Remains Strong

Investor demand for Nigerian Treasury bills remained strong in September.

The Debt Management Office received ₦10.22 trillion in bids against ₦2.05 trillion offered during the month before allotting ₦2.42 trillion.

At the final auction, demand for longer-dated instruments was particularly strong, with the long-end bid-to-offer ratio reaching 10.2 times.

The strong demand indicates that investors remain willing to deploy capital into government securities despite the changing interest-rate environment.

Inflation Could Limit Further Yield Declines

Inflation remains one of the factors that could restrict further declines in fixed-income yields.

Cordros forecasts September inflation at 15.40%, marginally above the 15.39% recorded in August.

The firm therefore expects limited room for additional monetary policy easing, particularly if inflation remains sticky.

Higher inflation can reduce the real return investors receive from fixed-income instruments and may require yields to remain sufficiently attractive to maintain demand.

Fresh government borrowing and continued OMO issuance could also prevent yields from falling sharply despite the expected liquidity inflows.

Foreign Investors Could Add Further Support

Cordros also expects foreign demand to provide additional support for Nigerian bonds and Treasury bills.

Nigeria’s inclusion in the JP Morgan GBI-EM Edge index could increase international investor participation in the domestic fixed-income market.

However, Cordros noted that the inclusion does not represent a return to the flagship GBI-EM Global Diversified Index, meaning the potential passive foreign inflows could remain smaller than those associated with a full return to the broader index.

The increased visibility of Nigerian securities among international investors nevertheless provides another potential source of demand for the market.

Implications for Housing and Real Estate Finance

The expected liquidity increase also has implications beyond the financial markets.

If increased liquidity contributes to lower yields and gradually reduces borrowing costs, it could improve financing conditions for businesses and investors. In the housing market, the direction of interest rates is particularly important because mortgage affordability and property development finance remain closely linked to the cost of capital.

Lower yields on government securities can also influence how institutional investors allocate funds across alternative asset classes. Over time, improved fixed-income conditions could create room for greater interest in longer-term investments, including infrastructure and real estate, depending on risk-adjusted returns.

However, the ₦11 trillion inflow does not automatically translate into cheaper mortgages or increased housing investment. Banks' lending conditions, mortgage-market depth, inflation, credit risk and the availability of suitable housing projects will continue to determine how much financial-market liquidity reaches the real economy.

October Market Outlook

Nigeria’s fixed-income market enters October with a substantial amount of liquidity scheduled to return through maturing securities and coupon payments.

Cordros expects the inflows to sustain reinvestment demand and support bonds and Treasury bills, but fresh OMO and NTB issuance, government borrowing and inflation could moderate the decline in yields.

The key market question will therefore be how much of the ₦11 trillion returning to the system remains available for reinvestment after the CBN and government absorb liquidity through new securities issuance.

For investors, the balance between liquidity, inflation and supply will remain central to fixed-income performance through October.

READ MORE