Excess Liquidity in Banking System Keeps Funding Costs Stable

Excess Liquidity in Banking System Keeps Funding Costs Stable

Excess liquidity in the money market kept funding costs stable at around 22%, reflecting the absence of significant pressure from the Central Bank’s operations.

The Apex Bank has not floated OMO bills for subscription, contrary to market expectations, due to excess funds in the banking system.

Despite a huge outflow related to the Federal Government of Nigeria (FGN) monthly bonds allotted to investors, financial liquidity conditions remain healthy.

In the absence of additional inflows, a total of N805.16 billion for the August FGN Bond was debited against the financial system credit balance.

MarketForces Africa gathered that banking system liquidity declined to N4.01 trillion from N4.93 trillion in the previous session due to settlement for FGN debt papers sold to investors.

Despite the tighter liquidity position, funding costs held steady. Specifically, the open buyback and Nigerian Overnight Financing rates were steady at 22%, according to FMDQ data.

The overnight lending rate was also unchanged at 22.2%, reflecting the Apex Bank policy rate.  In the Treasury Bills secondary market, Stronger trading activity supported the market, nudging the average Treasury Bills yield by 1bp to settle at 18.60%.

The market anticipates funding costs to remain broadly steady in the next session, as the bulk of the PMA-related bond drain has now been absorbed. Barring fresh maturities to replenish the system, rates should stay anchored near current levels. Money Market Rates Mixed as Banks Put Excess Cash with CBN