Interbank Rates Rise, Liquidity Tightens as Banks Pay AMCON Levies

Interbank Rates Rise, Liquidity Tightens as Banks Pay AMCON Levies

Interbank rates edged higher with tightening liquidity levels in the financial system after deposit money banks settled their obligations to Asset Management Company (AMCON). Funding pressure heated up as the banking system deficit expanded to a N280.57 billion deficit, an increase of N118.11 billion on the day.

Data from the FMDQ showed that money market rates remained at elevated levels following the monetary authority’s actions to keep liquidity at moderate levels. The effects of fast and sharp liquidity mopped up via huge open market operations forced banks to start pitching tents at the standing lending facility to meet funding requirements at the monetary policy floor rate.

System liquidity opened the week in surplus, reaching a high of N1.53 trillion mid-week. However, following the auction, the market flipped into a short position, closing the week with a negative balance of N118.22 billion.

The market situation hasn’t improved in the absence of significant inflows, and most analysts said rates could face additional pressures due to near-zero maturity from the fixed income instrument.

Reflecting the current liquidity condition, the money market rates edged higher, as the open repo rate (OPR) and overnight lending rate rose by 67 and 50 basis points to 32.17% and 32.67%, respectively. The Nigerian Treasury Bills True Yield (NITTY) curve advanced across most maturities, as yields rose on short- and medium-term instruments.

However, profit-taking activities in the secondary market induced a bearish tone, pushing the average yield up by 1 basis point to 18.36%. In the absence of significant expected inflows tomorrow, interbank rates are anticipated to remain elevated at current levels of 32.5%. #Interbank Rates Rise, Liquidity Tightens as Banks Pay AMCON Levies GCR Affirms Novare Fund Manager Nigeria Ratings with Stable Outlook