Banking System Liquidity Surplus Tamed Rates Swing
Banking system liquidity surplus has continued to tame short-term benchmark interest rates movement in the money market. Reversing the previous trend, local deposit money banks are pumping excess liquidity into the Central Bank of Nigeria (CBN) Standing Deposit Facility (SLF).
Borrowing activities at the Apex Bank standing lending facility have dropped drastically as liquidity balance remained healthy in April, bolstered by CBN FX swap payments, FAAC allocations, and contract payments.
The money market rates maintained track, trending behind the 27% level after two consecutive OMO bill auctions, monthly FGN bond sales, and Nigerian Treasury bill offers. Despite a ₦500 billion OMO auction settlement on Tuesday, system liquidity stayed ample, maintaining interbank rates around 26.5%.
The Nigerian Interbank Offered Rate (NIBOR) showed mixed movements across tenors. The overnight rate was flat at 0% to 26.75%, while the 1-month and 6-month rates increased by 0.51% and 0.47% to 27.18% and 28.17%, respectively.
In contrast, the 3-month NIBOR edged down by 0.01% to 27.68%. Meanwhile, money market indicators were also mixed, with the open repo rate unchanged at 26.50% and the overnight lending rate rising by 0.07% to 26.95%.
The liquidity in the banking system kicked off the day at N1.52 trillion, boosted by N1.31 trillion credited into the Standing Deposit Facility window of the CBN by local banks with excess funds.
Consequently, the open repo rate remained unchanged at 26.50% for the fifth straight session in the absence of a significant funding squeeze, while the overnight lending rate advanced by 7 bps to close at 26.95% on Tuesday.
“We expect settlement of the FGN Bond auction worth ₦397.89 billion to moderate available liquidity, with interbank rates expected to hover around their current levels,” analysts said. #Banking System Liquidity Surplus Tamed Rates Swing BUA Cement Bolsters Earnings; Profit Rises by 351% in Q1
