Excess Liquidity in Nigerian Banking System Hits N10trn
Excess liquidity in the Nigerian banking system peaked around N10 trillion after inflows from matured OMO bills. Total liquidity, or credit balance, in the financial system hovered at ₦9.97 trillion, up from ₦7.33 trillion reported on Monday, investment firms reported.
The flooded money market saw limited rate movement, with the Nigeria Overnight Financing Rate (NOFR) at a 20% floor, according to updates from investment banking firms.
Surplus liquidity prompted Apex Bank to float an OMO bills auction on Tuesday, raising about N3 trillion across short-term offers to money market investors.
The overnight Nigerian Interbank Offered Rate (NIBOR) declined by 4bps to 20.25%, signalling improved liquidity conditions within the banking system, Cowry Asset Limited said in a note.
Short-term funding rates moved mixed, with the Overnight (O/N) rate down 5bps to 20.20%, while the Open Repo (OPR) rate stayed unchanged at 20.00%.
“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.
Market analysts anticipate that settling the large OMO bills raised by the authority will drain the financial system, though liquidity conditions are likely to remain robust.
Meanwhile, the Treasury Bills secondary market saw broad-based yield declines, with the 1-month, 3-month, 6-month, and 12-month tenors shedding 32bps, 16bps, 13bps, and 3bps, respectively.
Despite the downward yield trend across benchmark maturities, cautious investor participation and subdued trading activity kept the average NT-Bills yield unchanged at 17.88%.
