Liquidity: Cash-Rich Banks Chase 24.5% SDF Rate at CBN Window
The short-term benchmark interest rates mixed due to the surplus liquidity position in the financial system. Deposit Money Banks (DMBs) continue to park funds with the Central Bank for a 24.5% rate on the standing deposit facility (SDF) window.
Despite three straight OMO auctions floated by the CBN, the liquidity level in the financial system closed at approximately N3.8 trillion, AIICO Capital Limited report highlighted.
The investment firm stated that the interbank market maintained strong liquidity at ₦3.79 trillion as commercial banks remain active at the SDF window.
Total placements settled at about ₦3.51 trillion after debit for the previous auction sold to foreign portfolio investors and commercial banks. With rates repricing in the fixed income market, analysts said cash-rich banks will prefer to place their excess funds at the CBN deposit facility.
Given the market dynamics post interest rate cut, Nigerian interbank rates showed mixed performance on Wednesday, with overnight rates dropping 7 bps to 24.89%.
The market experienced additional inflows from expired money market instruments, including ₦250 billion in OMO maturities. Hence, money market funding costs remained relatively stable, with the overnight rate easing 2 bps to 24.85% and the Open Purchase Rate unchanged at 24.50%.
The Treasury Bills secondary market displayed divergent trends on Wednesday through NITTY yields. Short-term 1-month and 3-month benchmarks rose 2 bps and 21 bps respectively, while longer-term 6-month and 12-month tenors fell 16 bps and 15 bps, respectively.
Despite these mixed movements, the average Nigerian Treasury Bills yield declined 10 bps to 17.69%, signalling continued bullish sentiment and robust investor appetite in the secondary market. Banks Deposit Excess Funds With CBN at 24.5% SDF Rate
