Money Market Rates Stable, Financial System Liquidity Tempers
Money market funding costs were steadied due to rounds of outflow for settlement of Treasury and OMO bills auctions conducted by the Central Bank of Nigeria (CBN).
In one swoop, banking system surplus funds reduced by more than half since the Apex Bank started its liquidity mop-up action last week.
There have been three open market operations since last week. Also, the CBN also started its Q4 Treasury bills auction during the week, helping to reduce funding gluts in the financial system.
On Thursday, the market liquidity moderated but remained robust at ₦3.47 trillion, despite a net outflow of about ₦339.34 billion for net Treasury bills settlement, according to a note from AIICO Capital Limited.
The investment firm reported that Deposit Money Banks (DMBs) maintained substantial placements of ₦3.50 trillion at the CBN’s standing deposit facility (SDF) window, while borrowings at the standing lending facility (SLF) window were minimal at ₦1.90 billion.
With the funds flow direction, the Nigerian interbank rates displayed mixed movements, with overnight rates easing 3bps to 24.86%, reflecting a boost to liquidity from maturing money market instruments, including ₦250 billion in OMO maturities.
Money market funding costs remained stable, with both the overnight rate and open purchase rate holding at 24.85% and 24.50%, respectively, Cowry Asset Management Limited said in its report.
Market analysts expect funding rates to remain moderate, barring any significant funding on Friday. The Treasury Bills secondary market saw yields decline across all tenors following ₦230.66 billion in T-bills maturities.
NITTY yields for 1-month, 3-month, 6-month, and 12-month tenors fell 14 bps, 60 bps, 26 bps, and 10 bps, respectively. Consequently, the average yield on Nigerian Treasury Bills dropped 32 bps to 17.37%, reflecting sustained bullish sentiment and strong investor demand in the secondary market. Naira Rallies to N1466/$ as Foreign Reserves Reach $42.574bn
