Money Market Rates Diverge as Liquidity Surplus Eases

Money Market Rates Diverge as Liquidity Surplus Eases

Money market rates diverged with N3.8 trillion in excess liquidity ahead of fresh inflows in the new week.  Due to strong financial system liquidity conditions, interbank rates were mostly mixed, and the market anticipates about N1.6 trillion in inflows from expired OMO, Treasury bills, and bond coupons in the new week.

Analysts said the market will remain flooded ahead of the midweek auction, during which the Central Bank of Nigeria (CBN) is scheduled to auction N750 billion in Treasury bills across standard tenors.

The money market opened on a strong footing last week, with system liquidity around ₦5.0 trillion, supporting a moderation in interbank rates, investment firm Cowry Asset Limited told investors in a note.

However, conditions tightened gradually, with liquidity closing at ₦3.84 trillion, down from ₦5.41 trillion the previous week.

Despite this decline, excess liquidity remained relatively robust, sustaining active market participation. The investment firm said investor behaviour continues to show a cautious and strategic tilt, with a clear preference for very short and longer tenors, while the mid-curve remains less attractive.

Interbank indicators reflected this tightening bias. Nigerian Interbank Borrowing Rate (NIBOR) rose across all tenors, with the overnight rate increasing by 7bps to 22.39%, largely driven by liquidity pressures following the ₦2.17 trillion OMO debit earlier in the week.

Cowry Asset said other tenors also trended higher, with the 1-month, 3-month, and 6-month NIBOR settling at 22.99%, 23.69%, and 24.19%, respectively.

At the close of the session on Friday, funding rates were mixed, as the open repo rate (OPR) held steady while the overnight rate declined by 19bps to 22.16%, suggesting some easing in short-term funding pressures.

Looking ahead, liquidity conditions are expected to remain broadly supportive in the near term, underpinned by significant inflows estimated above ₦1.6 trillion from NTB maturities, bond coupon payments, and OMO maturities.

However, the ₦750 billion NTB auction for midweek is likely to absorb part of this liquidity, suggesting a balance between early-week ease and potential tightening as the week progresses.

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