Banking Deficit Keeps Money Market Rates Elevated
Deficit balance in the banking system kept money market rates elevated in the absence of significant inflows. The financial system stay in negative territory despite inflows from FGN bond coupon payments at the beginning of the week.
Banks borrowing spree has heightened, with local lenders taking funds from the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF) to augment liquidity demand. Some cash-rich lenders are seen demanding higher rates to part with their funds.
Elevated short-term benchmark interest rates impacted banks’ costs of funds, and a basis for pricing financial institutions customers’ money market accounts.
With a more than N700 billion deficit, the short-term benchmark interest rates adjusted higher slightly, while the market anticipates additional inflows on Tuesday.
Investment firms said in their separate notes that about N53 billion is expected to flow into the money market today, but maintain that the amount will be insufficient to alleviate liquidity pressures.
Hence, the Nigerian Interbank Offered Rate (NIBOR) declined across all tenors, signalling there were intermittent inflows that improved liquidity in the banking system.
Meanwhile, key money market indicators trended upward, with the open repo rate (OPR) rising by 0.02% to 32.42% and the overnight lending rate increasing by 0.03% to 32.83%.
Interbank funding rates are expected to hover around these elevated levels, Broadstreet analysts said. The Nigerian Interbank Treasury Bills True Yield (NITTY) rose across most tenors. Meanwhile, the secondary market for Nigerian Treasury Bills remained bearish, as widespread investor selloffs drove the average yield up by 11 basis points to 19.09% #Banking Deficit Keeps Money Market Rates Elevated
