Excess Liquidity in Banking System Eases to N8.6trn, Rates Diverge
Money market rates diverged as liquidity surplus in the Nigerian banking system eased to about N8.6 trillion ahead of Thursday’s Treasury bills auction settlement.
The excess funding in the financial system was strengthened by the latest inflows from expired OMO, Treasury bills, and other money market repayments.
The authority has been less aggressive on liquidity and did not conduct open market operations after N2.13 trillion in expired OMO bills.
This kept liquidity heavy, and rate movements were restricted, with slight fluctuations in the short-term benchmark interest rates.
System liquidity closed at ₦8.59 trillion, down ₦760 billion on Tuesday, according to AIICO Capital Limited. The investment firm said in a note that Banks opened with ₦196.34 billion and placed ₦8.41 trillion at the Standing Deposit Facility (SDF) amid tightened lending appetite.
Also, due to liquidity shortages, Nigerian banks and other eligible financial institutions accessed ₦15 billion from the Central Bank Standing Lending Facility (SLF) during midweek operations.
As a result, the Nigerian money market closed Wednesday’s session bearish, with the overnight NIBOR rising 4bps to 20.25%, reflecting a marginal tightening in banking system liquidity.
Conversely, short-term funding rates were mixed, with the Overnight (O/N) rate easing by 1bp to 20.35%, while the Open Repo (OPR) rate remained unchanged at 20.00%.
Meanwhile, the Treasury Bills secondary market saw mixed yield movements: the 3-month and 6-month tenors gained 4bps each, the 1-month tenor fell by 2bps, and the 12-month tenor held steady.
Selective buying interest supported a mildly bullish market tone, with the average NT-Bills yield edging down 1bp to 17.91%. “Funding costs should stay close to the 20.00% OPR as long as the system has plenty of cash.
“T-bill auction settlement will take out ₦71.16 billion from the system. Rates could rise if the CBN withdraws more cash through OMOs or T-bill sales”, AIICO Capital Limited said.
