Money Market Rates Jump as Financial System Liquidity Falls

Money Market Rates Jump as Financial System Liquidity Falls

Money market rates worsened as liquidity balance in the financial system remained tight on Wednesday. The rate adjustment is expected to affect interest bearing deposits and mutual funds accounts.

The short term benchmark interest rates have been under pressure this week. The total balance in the financial system worsened further midweek in the absence of significant inflows that could support the funding demand of players in the money market.

According to Cowry Asset Limited, the Nigeria interbank offered rate (NIBOR) rose across most maturities, reflecting tighter liquidity conditions. Due to the strain on liquidity, the open repo rate (OPR) increased by 13 basis points to 31.23% today in the market. 

Also, the overnight lending rate (O/N) increased by 11 bps to 31.64% in the absence of significant inflows from maturing instruments or FAAC credit. The direction of this money market movement impacts interest bearing deposits and mutual funds accounts, analysts said.

Based on the fact that there is no inflow expectation on Thursday, analysts at AIICO Capital Limited said they expect interbank rates to hover at similar levels.

Money market rates movement on Wednesday is noted to reflect the ongoing tightened system liquidity, without adequate funding to support the financial system, analysts said. 

Interest rates for money market savings accounts are often called money market rates. These earnings are typically credited as a percentage of the savings balance on a daily or monthly basis. Money market rates change every day. #Money Market Rates Jump as Financial System Liquidity Falls