Overnight Rate Rises as Liquidity Dips, NOFR Steadies at 20%
The overnight lending rate rose as surplus liquidity in the banking system declined, keeping money market funding costs tighter, though the Nigerian Overnight Financing Rate remains steady at 20%.
An investment firm reported that the money market liquidity eased to ₦5.80 trillion, down ₦0.48 trillion from Friday’s closing level of ₦6.28 trillion.
The Debt Management Office auctioned N1.75 trillion worth of Nigerian government bills to investors, ultimately raising N1.2 trillion. Fixed-income market analysts said they expect the settlement of government bonds to drag system liquidity downward.
Meanwhile, the market anticipates additional inflows of about N5 trillion from OMO bill maturities, FAAC inflows, and Nigerian Treasury bills expiring this week, which will boost liquidity conditions.
The short-term funding rates were mixed, with the Overnight (O/N) rate rising by 6 bps to 20.44%, while the Open Repo (OPR) rate settled at 20.00%. Also, the Nigerian Overnight Financing Rate was steady at 20%, according to market data obtained by MarketForces Africa.
“Cash in the system is still high, so we expect funding costs to stay steady in the near term, unless large outflows occur”, AIICO Capital Limited said in its commentary note.
Money market liquidity is expected to remain comfortable, supported by the ₦2.07 trillion OMO maturity due, Herwood Securities Limited said.
The firm added that Interbank rates are expected to remain around current levels, with market participants monitoring the impact of the maturity inflow on system liquidity.
The OPR declined to 20.00%, exactly at the SDF floor, while the overnight lending rate eased by 47 bps to 20.38% last week, according to Coronation Merchant Bank’s research subsidiary.
Analysts said the OPR’s move to the bottom of the policy corridor indicates the corridor became binding during the week, consistent with the substantial improvement in system liquidity.
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