Money Market Rates Spike over Banking System Liquidity Squeeze

Money Market Rates Spike over Banking System Liquidity Squeeze

Money market rates—open repo rate and overnight lending rate—surged by 482 bps and 478 bps to reach 31.40% and 31.90%, respectively, as system liquidity closed at a short position of N29.1 billion.

The interbank market swung to a deficit position due to CBN foreign exchange settlements and commercial bank outflows to the central bank, AIICO Capital Limited said in a note.

Analysts explained that the liquidity squeeze drove rates sharply higher, with benchmarks reaching 32%. The repo rate jumped 4.82% to 31.40%, while the overnight rate rose 4.77% to 31.90% ahead of huge inflows, which are expected to upturn the liquidity balance.

The market anticipates FAAC inflows will restore liquidity, likely pulling rates down to the 26.5-27% range on Wednesday in the absence of a midweek Treasury bills auction. #Money Market Rates Spike over Banking System Liquidity Squeeze Burkina Faso Unlocks Access to Additional Loans from IMF