Interbank Rates Rise as Banks Borrow to Close Funding Gap
The short-term interest rates climbed further in the money market due to sustained liquidity pressure in the financial system. While there have been outflows relating to auctions by the apex bank, the inflows from maturing instruments have been limited.
The system has seen huge amounts taken out for FX auctions, Nigerian Treasury bills sales to investors who are somewhat local deposit money banks that invest in short term securities, and other related system outflows that kept liquidity balance in negative for a long while.
A number of authorised dealer deposit money banks experienced liquidity shortfalls, forcing market players to seek cover at the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF).
The move kept interbank rates in a double-digit high position ahead of Federal Account Allocations inflows in the absence of other payment receipts from maturing instruments.
Since the apex bank lifted suspensions on banks from accessing liquidity at its standing lending facility at a steep rate, local deposit lenders have pitched tents in the space to close the funding gap.
Yesterday, the Nigerian interbank borrowing rates increased across all tenors, reflecting a weak liquidity balance in the financial system, said Cowry Asset Limited in an emailed update.
According to data from the FMDQ platform, the open repo and the overnight lending rate remained at the double digit high in the absence of significant inflows to saturate the financial system.
The open repo rate inched higher over the day by 17 basis points to close to 31.45%, market data revealed. Also, the overnight lending rate increased by 27 basis points over the day to settle at 31.83%, separate investment banking firms said in their reports.
Nigerian Interbank Treasury Bills True Yield witnessed a predominantly downward trend across all maturities. As a result, the average secondary market yield for T-bills rose by 0.45%, reaching 18.63% due to sell sentiments. #Interbank Rates Rise as Banks Borrow to Close Funding Gap NAFDAC Destroys Fake Products Worth N43bn in Ibadan
