Excess Liquidity in Banking System Hits N8.2trn
The financial system witnessed a marginal surge in liquidity following the repayment of large OMO bills and the absence of Central Bank mop-up operations.
Flooded with excess funds, the short-term benchmark interest rates have hit the floor, hovering above 22% since the last monetary policy decision.
In search of earnings-boosting investment securities, banks continue to step up placements at the Central Bank of Nigeria (CBN) Standing Deposit Facility (SDF), which offers rates above Treasury bill returns.
Preference for short-term investment securities and other money-market instruments has continued to gain ground, with banks shying away from lending to the real sector amid macroeconomic pressures that have damaged private-sector performance.
System liquidity edged higher by +0.39% to N8.18 trillion, according to Lagos-based investment firm Meristem Securities Limited, from NGN8.15 trillion.
The surge was supported by N1.44 trillion in OMO repayments and an opening balance of NGN146.81 billion. The market remained flooded with liquidity despite 19.38% decline in the standing deposit facility.
Banks’ placement at the CBN window declined to N6.59 trillion. Data from the FMDQ platform showed that the overnight lending rate declined by 1 bps to 22.26%, while the open repo rate held at 22.00%.
Nigerian Interbank Offered Rates declined across all tenors on Tuesday, with the overnight rate easing 2bps to 22.33% on the back of improved system liquidity, buoyed by a ₦1.44 trillion inflow from OMO repayments.
In the Treasury Bills secondary market, yields moved in the opposite direction, with the 1-month, 3-month, 6-month, and 12-month maturities rising 15bps, 7bps, 3bps, and 3bps, respectively, nudging the average Treasury Bills yield higher to 17.84%, a reflection of tepid investor demand and lingering caution across the fixed-income space. Zenith Bank Becomes Most Valuable Lender in Nigerian Market
