Money Market Rates Fall on Excess Liquidity, MPR Cut
Money market rates declined moderately, driven by an excess of liquidity in the financial system following a cut in Nigeria’s monetary policy rate (MPR).
The Apex Bank’s 50 basis-point reduction in the benchmark interest rate signals a shift in the market environment, with a pivot toward lower funding costs in the money market.
Analysts reported that system liquidity remains exceedingly robust, skyrocketing to ₦3.75 trillion from ₦2.26 trillion in just one week.
This impressive increase is largely attributable to ₦770 billion in Open Market Operation (OMO) maturities, which reinvigorated the financial system last week despite monetary action.
The combination of elevated liquidity levels and the recent MPR cut by the Central Bank of Nigeria (CBN) initiated a widespread reduction in funding rates, particularly at the short end of the curve, as highlighted by experts at Cowry Asset.
This trend underscores the favourable market conditions that are emerging.
Market dynamics suggest that this wave of liquidity is poised to persist, with inflows from OMO (₦951.20 billion) and Nigerian Treasury Bill maturities (₦799.13 billion) expected to substantially exceed outflows from primary market auctions.
Anchoria Securities anticipates that CBN will continue to strategically manage system liquidity through OMO issuances, with interbank rates stabilising between 22.00% and 22.80%.
Recent data from the FMDQ platform demonstrates a commendable decline in Overnight lending and Open Repo (OPR) rates, which settled at 22.17% and 22.00% midweek, respectively.
This downward trend in funding costs reflects improved interbank liquidity conditions and a decrease in activity at the Standing Deposit Facility window by deposit money banks.
Cowry Asset noted that interbank benchmarks mirror this liquidity-driven adjustment, with NIBOR decreasing across all tenors—most notably, the Overnight fixing has shed 54 basis points week on week, now standing at 22.25%.
In the secondary Treasury bill market, average yields eased by 26 basis points to 17.23%, aligning with the gentler funding backdrop. The recent midweek OMO auction saw the CBN offer ₦600 billion across 6-day, 104-day, and 167-day maturities, reinforcing confidence in sustained liquidity and market stability.
This confluence of factors positions the financial system for a promising future, creating an environment ripe for investment and growth. GDP: Nigeria’s Economy Grows by 3.87% in 2025
