Money Market Rates Increase as Liquidity Deficit Expands

Money Market Rates Increase as Liquidity Deficit Expands

Money market rates increased strongly as the liquidity deficit expanded following the FX auction sales settlement and outflows relating to Remita transactions. This week, huge outflows from swap maturities and cash reserves maintenance debits have exceeded inflows from OMO maturities.

These dragged opening system liquidity downward, moving further into negative territory. The market was debited for foreign currency sold to banks. In a note, TrustBanc Financial Group Limited said the banking system liquidity opened with a negative balance for the third consecutive day, standing at ₦249.32 billion from N20.2 billion deficit.

Data from the FMDQ platform confirmed that the open repo rate (OPR) rose by 29 bps to close at 32.25%, while the overnight lending rate (O/N) increased by 42 bps, settling at 32.67%.

Cowry Asset Limited stated that liquidity conditions tighten further despite the N252.5 billion OMO repayment earlier in the week. The banking system liquidity is getting tight after OMO and FX auctions in the absence of significant inflows from maturing instruments.

System liquidity was positive for the third consecutive week at N346.96 billion on Friday, with call, overnight, and repo rates closing within a range of 7.63 – 27.86%, according to Coronation Research.

Local deposit money banks (DMBs) demand for funds was noted to increase on Wednesday. This triggered borrowing from the standing lending facility (SLF) of the Central Bank of Nigeria (CBN).

“Barring any significant inflow into the system, we expect liquidity conditions to remain tight, with interbank rates likely to persist at elevated levels,” TrustBanc said. #Money Market Rates Increase as Liquidity Deficit Expands FBN Holdings Records Huge Off-Market Shares Transactions