Liquidity inflows into Nigeria’s financial system are projected to rise sharply in May 2026, driven mainly by higher maturities from Open Market Operations (OMO) and Treasury bills, according to the latest monthly report by the Financial Markets Dealers Association (FMDA).
The report estimates total inflows will increase by 15.97 percent to N10.53 trillion in May, up from N9.08 trillion recorded in April, pointing to stronger system liquidity that could shape yields and investor behaviour across the fixed income market.
OMO maturities are expected to account for the bulk of the inflows, rising to N7.17 trillion from N5.88 trillion in April. Treasury bill maturities are also projected to increase significantly by 45.28 percent to N1.05 trillion, reinforcing the liquidity boost. In addition, corporate bond coupon payments are set to surge more than threefold to N95.09 billion.
However, the report noted that not all liquidity sources are expanding. Inflows from Federal Government bond coupons and commercial paper maturities are projected to decline slightly, while Federation Account Allocation Committee (FAAC) disbursements are expected to moderate to N1.8 trillion from N2.04 trillion recorded in April.
Despite these declines, the overall liquidity outlook for May remains robust, suggesting improved funding conditions within the system and potential downward pressure on short-term yields as investors respond to excess liquidity.
On the foreign exchange market, the naira appreciated across both the official and parallel segments in April, supported by improved FX liquidity. Total turnover at the Nigerian Foreign Exchange Market (NFEM) rose to $8.51 billion during the month.
According to the report, exchange rate movements were influenced more by global financial conditions and capital flows than by oil price dynamics. Increased oil production in March, alongside portfolio inflows, provided additional support to the currency.
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Looking ahead, FMDA warned that the naira could face mild pressure from maturing securities, particularly the large volume of OMO maturities exceeding N7 trillion. However, inflows from autonomous sources are expected to provide some cushion against potential volatility.
In the fixed income market, FGN bond yields showed mixed movements in April, with declines observed at the short and long ends of the curve, while mid-tenor yields edged higher. Treasury bill yields declined across most maturities, reflecting improved demand and easing short-term rates.
The report also highlighted broader trends across global markets, noting that yields declined across several African economies, signalling improved investor sentiment, while yields in major developed markets edged higher amid persistent inflation pressures.
Meanwhile, Nigeria’s equities market extended its bullish run in April, with the NGX All-Share Index advancing by 20.36 percent, building on gains recorded in March. Market capitalisation rose by 20.73 percent to N155.99 trillion, supported by renewed investor confidence and sustained buying interest.
Trading activity strengthened considerably, with volume rising by 110.11 percent and value surging by 193.28 percent, indicating deeper liquidity and increased market participation. The number of deals also climbed by 72.83 percent, pointing to broad-based engagement across the equities market.
FMDA noted a near-perfect correlation between the All-Share Index and the NGX 30 Index, suggesting that market performance in April was largely driven by the top 30 listed companies.
On the global front, elevated oil prices provided some support to Nigeria’s FX inflows and helped stabilise the naira during the period. However, persistent supply disruptions continued to sustain inflationary pressures, limiting broader macroeconomic gains.
The report also flagged ongoing uncertainty surrounding the Strait of Hormuz as a key risk to oil price stability, with potential implications for inflation and Nigeria’s external position.
Global monetary policy conditions remained relatively tight but stable, as major central banks largely held interest rates steady amid lingering inflation concerns. This cautious stance, FMDA noted, may limit aggressive capital flows into emerging markets like Nigeria, even as some economies continue to signal the possibility of further tightening.
For banks and discount houses, the report said elevated yields continue to support income on fixed income portfolios, while the moderation in Treasury bill yields points to easing conditions at the short end of the market. The mixed bond yield curve reflects selective investor positioning across different maturities.
On the liability side, system liquidity remains supportive of stable funding conditions, reducing pressure on deposit mobilisation. However, foreign exchange demand remains a key consideration for funding, given external vulnerabilities. Short-term funding conditions are expected to remain broadly stable.
FMDA advised market participants to position portfolios to benefit from still-elevated yields, while remaining cautious on FX exposures amid global uncertainty and volatile capital flows. It also urged investors to take advantage of strong liquidity conditions to optimise funding and allocation strategies, while maintaining flexibility as global developments continue to shape market direction.