OMO Outflow Tightens Liquidity, Pushes Money Market Rates to 30%
Money market rates hovered around the 30% level as open market operations (OMO) auction settlement drained liquidity levels in the financial system. This happened as the Central Bank of Nigeria floated N600 billion OMO bills for subscriptions.
The Apex Bank mopped up a huge sum of N1.25 trillion, thus tightening liquidity available for market participants to meet their funding demand. Some deposit money banks and other investment funds responded by borrowing from the standing lending facility in response to huge OMO outflows.
The open repo rate surged by 100 basis points to 29.75% in the market in the absence of significant inflows to support the financial system’s liquidity on Thursday. Also, the overnight lending rate climbed by 109 basis points to close at 30.42% due to huge outflows used by banks and foreign portfolio investors to settle their OMO bills allotment payments.
The CBN’s OMO auction today saw strong demand, with ₦2.174 trillion in bids for the ₦600 billion offering. The central bank allotted ₦1.25 trillion, tightening liquidity and pushing interbank rates higher. The market anticipates interbank rates to hold at similar levels tomorrow unless significant inflows improve liquidity.
The Nigerian Interbank Offered Rate (NIBOR) trended upward across all maturities, reflecting tightened liquidity conditions in the banking system. Similarly, money market rates climbed, as the open repo rate and overnight rate rose by 1.00 and 1.09 percentage points, respectively, to settle at 29.75% and 30.42%.
The Nigerian Treasury Bills curve declined across all maturities, indicating lower yields on short- and medium-term instruments, investment firm Cowry Asset Management Limited said in a note.
Nonetheless, the secondary market maintained a bullish tone, with strong investor demand pushing the average yield down by 8 basis points to 19.35%. #OMO Outflow Tightens Liquidity, Pushes Money Market Rates to 30% EIA Upgrades Brent Price Forecast for 2025 by $2.90
