Banking System Deficit Keeps Short Term Interest Rates above 32%

Banking System Deficit Keeps Short Term Interest Rates above 32%

A huge deficit in the banking system kept the short term benchmark interest rate above 32%, data from the FMDQ platform confirmed. On Thursday, liquidity deficit in the banking system reduced slightly ahead of settlement for huge OMO bill sold by the Central Bank.

The expected outflow triggered bearish prediction that money market rates could close heavier due to surprise allotment made by the CBN at the auction yesterday. On Thursday, the deficit in the banking system eased by 18%, opening with a shortfall of N551.2 billion from N668.3 billion midweek.

Consequently, interbank funding rates remained flat at 32.38% and 32.75%, respectively, TrustBanc Financial Group Limited said in a note. Analysts expect the deficit in the banking system to expand further on Friday when debits worth ₦1.4 trillion for OMO auction held would be passed.

In the absence of substantial inflows from maturing instruments, market condition is projected to worsen from Friday after the settlement of the OMO auction. “Given the absence of anticipated major inflows and a considerably higher debit market position tomorrow, we expect interbank rates to remain elevated”, AIICO Capital Limited said in a note.

The Nigerian Interbank Offered Rate (NIBOR) declined across most tenors, except for the overnight NIBOR, which rose by 0.05% to 32.87%.  #Banking System Deficit Keeps Short Term Interest Rate above 32% CBN Opens FX Window for BDC to Stock up at NFEM Rate