Overnight Rate Dips on Excess Banking System Liquidity
The overnight lending rate has decreased by 2 basis points as excess liquidity in the financial system continues to ease interbank borrowing pressures.
The financial system remains sufficiently liquid, thanks to repayments from expired short-term instruments and the lack of significant outflows related to the Open Market Operations (OMO) auction.
The Central Bank of Nigeria (CBN) has taken a less aggressive approach to liquidity management this week, even with inflows from matured OMO bills and Treasury bills entering the money market.
Market liquidity started the day with a credit balance of ₦3.86 trillion, an increase of ₦632.81 billion from Wednesday’s close, bolstered by ₦378.43 billion from Treasury bill maturities, Herwood Capital Limited disclosed in a note.
With over ₦29 billion in primary market repayments, the interbank market ended positively on Thursday, leading to a decrease in the overnight Nigerian Interbank Offer Rate (NIBOR) by 4 basis points to 22.24%.
In a note, Cowry Asset Limited said longer-dated tenors also declined, with 1-month, 3-month, and 6-month rates dropping by 16 basis points, 31 basis points, and 0.1 basis point, respectively.
As a result, money market funding costs varied: the overnight lending rate fell by 2 basis points to 22.21%, while the Open Repo rate remained unchanged at 22.00%.
Due to strong trading activity and robust investor interest, the average yield on Nigerian Treasury bills also decreased by 4 basis points to 18.13%.
Financial analysts said they expect Interbank funding rates to remain range-bound in the near term, supported by current system liquidity levels. #Overnight Rate Dips on Excess Banking System Liquidity
