Excess Liquidity Expands by 37% as Banks Lock N5trn in SDF
Excess liquidity in the financial system surged by 37% as deposit money banks (DMBs) increased their placements with the Central Bank of Nigeria (CBN) Standing Deposit Facility.
Liquidity conditions improved in the absence of open market operations that the Apex Bank has been conducting to mop up excess funds in the money market.
With a tighter appetite for lending to the real sector, commercial banks’ combined placements at the regulator’s standing deposit facility increased by about 40% to N5.06 trillion on Thursday.
The heavily loaded money market kept the short-term benchmark interest rates in check. The banking system’s liquidity expanded to N5.14 trillion, with minimal activity at the standing lending facility.
Hence, Nigerian Interbank Offered Rates declined across all tenors on Thursday, with the overnight rate slipping by 5 bps to 22.21%, reflecting improved system liquidity.
The 1-month, 3-month, and 6-month tenors followed suit, dropping 7 bps, 17 bps, and 28bps, respectively, according to Cowry Asset Management Limited.
Funding costs were divergent, however, as the Overnight rate eased by 2 bps to 22.19%, while the Open Repo rate remained unchanged at 22.00%. CBN Mandates Banks, Fintechs to Host Payment Data Locally
