Funding Rates Mixed on N1.6T Excess Liquidity in Financial System
Excess liquidity in the banking system kept funding rates in check even with huge outflows relating to the settlement of the Federal Government of Nigeria (FGN) Sukuk issuance. Based on market indicators, money market rates closed in mixed directions with N1.6 trillion in excess liquidity.
The financial system liquidity remained elevated, supported by sustained flows into the Standing Deposit Facility (SDF) window, according to a market report. In a note, CardinalStone Partners Limited reported that net system liquidity closed at a surplus of N1.6 trillion despite a N300 billion settlement for Sukuk auctioned by the Debt Office.
The short-term benchmark interest rates remained stable at 26.5% in the absence of liquidity pressures and activities at the standing lending facility of the Central Bank.
Hence, the Nigerian Interbank Offered Rate (NIBOR) declined across all tenors, indicating improved liquidity conditions in the banking system. Specifically, the overnight, 1-month, 3-month, and 6-month rates fell by 4bps, 32bps, 18bps, and 40bps, respectively, according to Cowry Asset Limited.
Meanwhile, money market rates were mixed: the Open Repo Rate (OPR) held steady at 26.50%, while the overnight lending rate inched up by 9 bps to 26.95%. Interbank rates are expected to stay steady, barring unexpected liquidity shocks.
To manage the liquidity level in the financial system, the Central Bank has conducted two open market operations (OMO) bills with N600 billion offer size at each primary market auction. The auctions were well received, reducing negative effects of more than N900 billion inflows from matured OMO bills.
The NITTY curve declined across most tenors, except for the 3-month benchmark, which rose by 12 basis points. Meanwhile, the secondary market for Nigerian Treasury Bills remained bullish, as the average yield dropped by 2 basis points to 20.66%. Seplat Energy Falls by 10% as Investors Exit Positions
