This is how the Nigerian markets reacted to MPC decision

The Nigerian financial markets have remained relatively stable in the aftermath of the recent Monetary Policy Committee (MPC) decision, which saw all parameters left unchanged. The Key interest rate, the Monetary Policy Rate (MPR) stood at 13.5%, maintaining the corridor. Despite some excitement surrounding comments about potentially limiting banks' participation in the securities markets, the overall sentiment in the market has been bullish with significant interest from buyers. Leading up to the MPC decision, a flurry of selling activities and profit-taking occurred as players aimed to create liquidity in preparation for the bond auction. The Debt Management Office (DMO) announced the issuance of 100 billion bonds spanning across 2023, 2029, and 2049 buckets. While expectations were high for a bullish sentiment post-MPC, the actual trading activities revealed mixed sentiments with yields closing at around 11% for treasury bills and 14% for bonds. One of the significant points of discussion post-MPC was a statement made by the CBN governor regarding potential limitations on banks' activities in the fixed income market. This announcement was anticipated to trigger a major shift in the market, but due to the lack of clarity on the modality, uncertainty prevailed. Market participants are closely monitoring these developments and expecting increased buying interest as clarity emerges. Shifting focus to the foreign exchange market, the Nigerian Naira has maintained stability against the USD, trading within the range of 360 to 361 levels. Despite no significant bullish activity pushing the exchange rate higher, the supply remains steady. Notably, the average daily turnover for this month has slightly increased from April, with an average turnover of around $262 million. The country's reserves, currently above $45 billion, indicate a stable outlook for the Naira. In terms of system liquidity, the market has been characterized by stability from the opening of the week. System liquidity started at $259 billion, with expectations of a minor liquidity reduction post the OMO auction. As the week progresses, the Funds Allocation Committee (FAC) meeting initiated on Tuesday is anticipated to inject additional liquidity into the system. With an OMO maturity of approximately $107 billion, the central bank is likely to manage liquidity effectively. Traders have observed the Central Bank of Nigeria's (CBN) OMO activities to be relatively less aggressive recently. The current stance of the central bank appears to be more accommodative, focusing on maintaining moderate liquidity in the system rather than aggressive tightening measures. This strategy aligns with the conversations post the MPC meeting, indicating a cautious approach towards liquidity management. In summary, the Nigerian financial markets are navigating through the aftermath of the MPC decision with a sense of cautious optimism. While uncertainties loom regarding the potential implications of limiting banks' activities in the fixed income market, traders are bracing for further clarity and possible shifts in market dynamics. The stability in the forex market and the measured approach of the CBN towards liquidity management signal a balanced outlook for the Nigerian economy.