Nigeria’s FMDQ debt market shrank by N720 billion over two days as volatility in the Open Market Operations (OMO) segment coincided with declining yields across Treasury Bills.
Data from the FMDQ Securities Exchange show that total market capitalization fell from N104.68 trillion on March 16 to N103.96 trillion by March 18, 2026.
The development reflects ongoing repricing across the fixed income market as investors respond to shifting monetary conditions and lower rates at the primary market auction.
The contraction follows the Central Bank of Nigeria’s latest Treasury Bills auction, where rates declined across key tenors and allotments came in below total subscriptions.
The apex bank allotted N691.86 billion out of the N1.05 trillion offered, signaling a cautious stance amid evolving liquidity conditions. This has influenced both primary and secondary market dynamics, with investors adjusting portfolios in response to yield movements.
What the data is saying
The OMO segment recorded significant volatility, diverging from the broader trend of easing yields in the fixed income market. While some instruments saw yield increases, others declined sharply, reflecting uneven investor demand across maturities.
- The June 2026 OMO bill rose to about 20.45%, while the September 2026 maturity dropped significantly to 18.39%, representing a 2.49% decline.
- The 5-May 2026 OMO bill declined by 0.78% to 20.38%, while the July 2026 tenor edged down by 0.05% to 20.45%.
- The August 2026 OMO bill also fell by 0.18% to 19.55%, indicating continued adjustments in short-term instruments.
- Treasury Bills yields dipped marginally, with April and May 2026 instruments easing to 16.17% and 16% respectively, while early 2027 maturities hovered around 19%.
Money market conditions remained largely stable despite these shifts, with the Open Repo Rate steady at 22% and the Overnight Rate slightly easing to 22.21%, suggesting balanced liquidity in the system.
More insights
The FGN bond segment showed relative stability, with minimal changes in yields across most maturities. Benchmark bonds largely held within a narrow range, indicating steady investor sentiment in the longer-term debt market.
- Most FGN bonds recorded unchanged yields, clustering between 14.39% and 16.17%.
- The February 2034 bond stood out, declining 10 basis points to 15.95%.
- In the derivatives market, the 10-year bond futures contract for March 2026 settled at 113.44.
- Longer-dated futures contracts for June and December 2026 closed at 107.86 and 125.31 respectively, while 2-year contracts showed modest upward pricing.
This overall stability in bonds and derivatives suggests expectations of limited near-term volatility, even as short-term instruments continue to reprice.
What you should know
The decline in market size aligns with the downward movement in Treasury Bills yields observed at the Central Bank’s recent auction. Analysts interpret the coordinated easing across primary and secondary markets as a sign of gradual transition in Nigeria’s fixed-income landscape.
- The reduction in yields at longer maturities indicates improving investor confidence and expectations of softer monetary policy ahead.
- The N720 billion drop in market size is largely attributed to mark-to-market valuation effects rather than widespread selloffs.
- Maturing instruments rolling off the books also contributed to the contraction in total debt outstanding.
- Investors are increasingly repositioning portfolios in anticipation of potential monetary easing and improved macroeconomic conditions.
Overall, while the immediate decline reflects valuation adjustments, the broader outlook points to cautious optimism as the market adapts to evolving rate dynamics.
