Interbank Rates Decline as FAAC Credits Bolster Liquidity
Liquidity pressures in the Nigerian banking system declined as inflows from the Federal Accounts Allocation Committee (FAAC) bolstered the amount in the banking system.
The banking system liquidity improved by 291.54%, opening the day with a surplus balance of N507.57 billion, marking its fifth consecutive day in positive territory, TrustBanc Financial Group Limited.
FAAC inflows into the money market has been disbursed in piece. Recall that FAAC disbursements to the three tiers of government in January (from the total revenue generated in December) declined by 17.5% month on month to N1.42 trillion from N1.73 trillion.
Analysts attributed the significant decline partly to a 6.6% month-on-month naira appreciation in December, when the naira was priced at N1,563.47 vs. November, when it closed at N1,667.41.
This lowered exchange rate gains from foreign-related revenue sources, and there was a decline in domestic oil production. A significant part of the amount is expected to pass through the money market.
Due to the absence of funding pressures, the short-term interest rates benchmark declined in the money market. Analysts said money market indicators, specifically the overnight policy rate (OPR), fell by 36 bps to 26.58%, while the overnight rate (O/N) dropped by 50 bps to 27.00%.
Hence, banks borrowing reduced as records showed a surplus liquidity level ahead of a very liquidity-filled money market in February. Next month, liquidity level is expected to receive N3.5 trillion as inflows from bonds, Treasury bills, and matured OMO bills.
Analysts said they expect interbank rates to remain around similar levels unless there is a significant catalyst. “Barring any significant debits, we expect the system to remain buoyant, with interbank rates trading at current levels,” TrustBanc said in an investors note.
# Interbank Rates Decline as FAAC Credits Bolster Liquidity Investors Portfolio Value Increased by N347bn in Equities Market
