Interbank Rates Fall as FAAC Credit Eased Liquidity Pressure

Interbank Rates Fall as FAAC Credit Eased Liquidity Pressure

Interbank rates fall as money market pressures eased on the back of improved liquidity in the banking system, driven by inflows from the Federal Accounts Allocation Committee (FAAC). Analysts predict that liquidity will be further squeezed following N530 billion Treasury bills auction on Wednesday.

According to market reports, the short-term interest rate benchmark declined to 30% range, though liquidity levels remained tight. Banks maintained borrowing streaks from the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF) in the absence of significant fund inflows.

Analysts predicted that local lenders would continue to access funds from the facility this week due to the increasing funding requirement to satisfy their daily liquidity demand.

On Wednesday, interbank liquidity started off lower, dipping into negative territory, separate market analysts said in a note.  However, as the day progressed, liquidity improved significantly due to the deposit of some FAAC payments and bond coupons, AIICO Capital Limited told investors in a note.

As a result, interbank rates eased further. Specifically, the overnight policy rate (OPR) declined by 0.96%, bringing it down to 29.58%, while the overnight lending rate (O/N) decreased by 0.44%, resulting in a new rate of 30.56%.

In a note, TrustBanc Financial Group Limited revealed that the banking system liquidity plunged by 143%, opening the day with a deficit of ₦93.55 billion, despite inflows of ₦75.39 billion from bond coupon repayment.

Tight liquidity condition in the money market has persisted since last week. The financial system liquidity was under pressure, with liquidity closing negative at N397.79 billion on Friday. Call, overnight, and repo rates closed within a range of 7.70–32.75% as rates in the money market tightened.

“Given the current liquidity balance, we expect interbank rates to remain at similar levels in the near term,” TrustBanc Financial Group Limited said. #Interbank Rates Fall as FAAC Credit Eased Liquidity Pressure Naira Plunges as Banks Resume FX Sales to Customers