Interbank Rates Decline as Banking System Deficit Moderated
The banking system is facing a huge liquidity deficit, which at the last count was N190.50 billion on Thursday, an improvement from N249.3 billion deficit reported midweek.
The inflows that reduced pressures of liquidity size affected the short-term interest rates benchmark. Interbank rates eased as the banking system liquidity deficit moderated, investment firms said in separate reports.
On Thursday, the deficit in the banking system moderated by about 24% to close at ₦190.50 billion. The banking system has been relatively tight this week, with a liquidity deficit as high as N389.7 billion on the back of significant demand for funding.
Hence, funding rates eased but are still at elevated points, with banks seeking to borrow from the Central Bank of Nigeria’s (CBN) standing lending facility to augment their liquidity requirements.
Data from the FMDQ platform revealed that the open repo rate declined by 4 basis points to close at 32.21%, reflecting the squeeze in the financial system. The overnight lending rate fell by 3 basis points to close at 32.64% in the absence of significant inflows to boost the liquidity in the money market.
The Nigerian Interbank Offered Rate (NIBOR) eased, supported by a significant increase in system liquidity. Analysts said they expect funding rates to hover around prevailing levels in the absence of any significant catalysts.
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