Banking System Surplus Liquidity Tops N6trn Ahead of Huge Inflows
Excess liquidity in the Nigerian banking/financial system climbed by 55.42% to about N6.3 trillion, with the market anticipating about N5 trillion in additional inflow during the week.
According to investment firms, net liquidity surplus edged up by more than 69% to N6.28 trillion at the close of the trading session on Friday, up from N3.71 trillion the previous week.
The surge was supported by an N2.41 Trillion inflow from OMO bill maturities and substantial placements in the Central Bank of Nigeria’s Standing Deposit Facility (SDF).
Broadstreet investment firms reported in their separate updates that the average balance at the SDF window was N4 trillion last week. The elevated liquidity position provided some relief to money market funding conditions, although short-term rates remained relatively high.
The market anticipates significant inflows of about N5 trillion from FAAC, matured OMOs, and Nigerian Treasury bills to further boost liquidity conditions.
Analysts said the CBN is more likely to float OMO bills for subscription to reduce excess funds in the money market and keep rates in check.
The market anticipates significant inflows of about N5 trillion from FAAC, matured OMOs, and Nigerian Treasury bills to boost liquidity in the financial system this week.
The financial system closed relatively stronger last week, in the absence of active open market operations and a soft mop-up of midweek Treasury bills sold to investors at the main auction.
The market anticipates an inflow of about N2.07 trillion from expired OMO bills, driving a liquidity surge in the money market in the new week. This will come in addition to N2.43 trillion in FAAC inflows to states.
Also, the market expects about N399 billion in payments from matured Nigerian Treasury bills to add to the surplus fund in the money market.
“These inflows could sustain demand for short-term instruments and moderate upward pressure on money market rates”, Cowry Asset Management Limited said in a note.
The investment firm, however, added that settlement obligations arising from the forthcoming FGN bond auction could absorb a portion of the anticipated liquidity, potentially tempering the impact of these inflows on funding conditions and secondary market yields.
“Investors are also likely to reposition their portfolios following the latest inflation reading of 14.63%, weighing the benefits of locking in prevailing yields against expectations of further disinflation and possible adjustments in monetary policy”.
With plenty of cash in the system, analysts at AIICO Capital Limited said they expect funding costs to remain low in the near term unless large outflows occur. OMO Inflow Boosts Money Market Liquidity, Funding Rates Rise
