Interbank Rates Diverge as Banking System Liquidity Surplus Narrows
Interbank rates diverged as surplus liquidity in the Nigerian banking system moderated ahead of inflows from maturing OMOs and Treasury bills.
The Nigerian money market opened mixed, with the Nigerian Interbank Offered Rate (NIBOR) unchanged at 20.29%, indicating relative stability in banking system liquidity.
Reflecting money market liquidity dynamics, short-term funding rates diverged, with the Overnight (O/N) rate easing by 13bps to 20.25%, while the Open Repo (OPR) rate held steady at 20.00%.
Market liquidity opened the day with a credit balance of ₦7.33 trillion, down ₦0.04 trillion from Friday’s close of ₦7.37 trillion.
Investment analysts said the Central Bank of Nigeria (CBN) will likely turn aggressive in mop-up action to reduce excess money market flows during the week.
Liquidity conditions are expected to remain supportive, underpinned by anticipated inflows of about ₦ 2.59 trillion, comprising ₦2.02 trillion in OMO maturities and ₦572.55 billion in Treasury bills maturities.
“These inflows should sustain excess cash balances within the banking system and provide further support for demand in the secondary Treasury bills market”, Cowry Asset Management Limited said in a note.
Market analysts said how much the liquidity surplus translates into lower market yields will depend on the CBN’s liquidity management operations and the DMO’s primary market activities.
Money market liquidity is expected to remain comfortable, with interbank rates likely to hover around current levels, subject to changes in system liquidity, Herwood Securities Limited said in a note.
However, the ₦2.02 trillion maturity is expected to further support liquidity conditions, the investment firm said in its market update. Nigeria’s 20-Year US Dollar Bond Yield Falls to 8.50%
