Banks Step Up Placement with CBN as Excess Liquidity Hits N4.6trn
Deposit Money Banks (DMBs) sought to boost earnings with increased placements with the Central Bank of Nigeria (CBN) Standing Deposit Facility.
Amidst rising asset quality risks in the banking segment, commercial lenders are sticking to short term interest yielding naira assets in the money market.
Banks placement at the deposit facility of the CBN rose by 2.67% to N3 trillion on Tuesday, according to TrustBanc Financial Group Limited, with system liquidity rising to N4.59 trillion.
The surplus liquidity affected money market rates which moved in different direction as additional inflows from expired OMO bills boosted liquidity profile.
Reacting, the CBN floated OMO auction, offering N600 billion across short term maturities. Though subscription came substantial, the CBN under allotted as investors sought higher rates.
Money market had open with a surplus balance of ₦4.6 trillion, reflecting an increase of ₦1.5 trillion from the previous level. The improvement was mainly driven an inflow of ₦1.4 trillion from OMO maturity and slight increase in banks placement in SDF.
Hence, interbank rates remained relatively stable with the overnight rate holding at 24.88%, reflecting equilibrium in system liquidity and muted funding pressures as financial institutions continued deploying excess liquidity into the SDF.
The 1-month tenor was similarly unchanged at 25.75%, while the 3-month and 6-month tenors advanced 17bps and 25bps respectively, investment firm Cowry Asset reported.
Money market funding costs presented mixed movements, with the overnight lending rate climbing 6 bps to 24.92%, while the Open Purchase Rate remained anchored at 24.50%.
In the Treasury Bills secondary market, yields compressed across all maturities on Tuesday, with the 1-month, 3-month, 6-month, and 12-month benchmarks declining 16 bps, 11 bps, 20 bps, and 11 bps, respectively.
Consequently, the composite Treasury Bills average yield contracted 4 bps to 17.41%, signalling robust investor demand and persistent bullish sentiment in the fixed-income market. Oando Plc: Resilient Energy Group Faces Earnings Storm
