Money Market Rates Mixed Amidst Sharp Liquidity Shrink
Money market rates closed on a mixed note last week as the Central Bank of Nigeria (CBN) mopped up liquidity from the financial system via open market operations.
The Nigerian money market opened the week on a strong liquidity footing, with banking system liquidity recording a net surplus balance of ₦7.0 trillion.
The heavily flooded market was supported by ₦102.7 billion in inflows from primary market repayments, according to investment firm Cowry Asset Limited.
The activities of local deposit money banks (DMBs) at the Standing Deposit Facility enhanced the financial system liquidity surplus in the absence of significant funding pressures.
The CBN sustained its aggressive liquidity sterilisation strategy through an Open Market Operation (OMO) auction, in which it mopped up approximately ₦1.4 trillion from the financial system.
Consequently, system liquidity moderated significantly to close the week at ₦2.87 trillion, reflecting the apex bank’s continued commitment to containing excess liquidity and supporting its broader monetary policy objectives.
Consequently, the overnight Nigerian Interbank Offered Rate (NIBOR) edged higher by 2 basis points (bps) week-on-week to 22.30%, indicating marginally tighter short-term funding conditions. Similarly, the Overnight (OVN) rate eased by 5bps to 22.18%, while the Open Repo Rate (OPR) remained unchanged during the week.
Activity in the secondary Treasury bills market remained relatively subdued, as sell-side pressure across the short- and medium-term maturities pushed the average Treasury bills yield 6bps higher to 18.65%.
The OMO auction attracted robust investor demand, with subscriptions reaching ₦1.6 trillion against an offer of ₦600 billion across the 7-day and 161-day tenors.
The apex bank eventually allotted ₦1.4 trillion, with stop rates clearing at 21.90% and 19.80%, respectively, underscoring investors’ continued appetite for high-yielding risk-free instruments.
“We expect liquidity conditions to remain relatively comfortable, supported by ₦269.36 billion in Treasury bills maturities and nearly ₦3.92 trillion in OMO maturities”, Cowry Asset Limited said.
However, the anticipated ₦700 billion Treasury bills primary market auction is expected to partly offset these inflows as the CBN continues to actively manage system liquidity in line with its tight monetary policy stance. Nigerian Government Raises N19trn from T-Bills, Bonds in 6 Months
