Interbank Rates Rise amidst Liquidity Shift in Banking System

Interbank Rates Rise amidst Liquidity Shift in Banking System

Interbank rates increased as cash reserve ratio (CRR) debit kept banking system liquidity in deficit. The financial system closed at N1.32 trillion negative on Friday following the debit of N1.68 trillion to the financial system for OMO bill auction settlement.

At the beginning of the week, liquidity levels remained tight in the absence of significant inflows from maturing debt instruments. Demand for liquidity forced some banks to borrow from the Central Bank borrowing window.

But some cash-rich lenders were seen demanding higher rates as over sustained liquidity pressures in the money market. In its note, AIICO Capital Limited, however, noted that financial liquidity improved slightly on Monday but remained in negative territory due to last Friday’s CRR activity.

Banking system liquidity peaked at N1,518 trillion on Thursday before auction payment. At the lowest. the liqudity balance printed at N516 billion before Nigeria treasury bills auction by the CBN on Wedneday. The amount in the financial system has been fluctuating despite huge matrutiies in March.

However, interbank rates edged higher, with the overnight policy rate (OPR) rising by 4.82% to 31.90% and the overnight rate increasing by 4.83% to 32.50%. The surge in the short-term benchmark interest rates is expected to impact money market accounts and investment returns on mutual funds.

The Nigerian Interbank Offered Rate (NIBOR) declined across most tenors, except for the overnight NIBOR, which rose by 1.64% to 32.32%. #Interbank Rates Rise amidst Liquidity Shift in Banking System CBN Opens FX Window for BDC to Stock up at NFEM Rate