Excess Liquidity in Banking System Rises to N6.94trn, Rates Mixed
Interbank benchmark rates moved in mixed directions despite a massive liquidity surge in the Nigerian financial system, as deposit money banks (DMBs) continued to park substantial excess funds with the Central Bank of Nigeria (CBN).
Market data show banking system liquidity hit a weekly peak of ₦8.4 trillion, largely because the apex bank took a less aggressive stance on mopping up excess funds in the open market.
Liquidity Surplus Hits ₦6.94 Trillion
The banking system’s liquidity expanded significantly week-on-week, reflecting the absence of funding pressures and inflows from expired instruments.
Financial analysts at Cowry Asset Management Limited reported that net liquidity surplus rose to ₦6.94 trillion by Friday’s close, up from ₦6.28 trillion the previous week.
Excess credit within the banking system surged by about ₦2.1 trillion, supported by substantial maturities and repayments of short-term instruments.
The market recorded about ₦2.1 trillion in inflows from matured OMO bills, ₦392.8 billion from expired Treasury bills, and ₦330.0 billion in primary market repayments.
Despite multiple liquidity inflows throughout the week, the CBN conducted a single Open Market Operation (OMO) auction on Thursday, with mop-up operations raising ₦2.6 trillion to refinance maturing OMO obligations to investors.
Banks Park ₦7.9 Trillion at CBN’s Standing Deposit Facility
Consequent to the persistent liquidity overhang, commercial bank balances at the Central Bank of Nigeria’s Standing Deposit Facility (SDF) surged to ₦7.9 trillion.
Analysts at Cowry Asset noted that elevated SDF usage highlights commercial banks’ preference for parking unutilized funds with the central bank amid limited immediate funding needs across the real economy.
Short-Term Funding Rates Shift
Despite the massive volume of liquidity in circulation, short-term interbank money market rates exhibited mixed performance.
The open repo rate held flat at 20% at Friday’s close. Meanwhile, the Overnight (OVN) Rate eased marginally by 2 basis points (bps) to 20.36%, down from 20.38% the previous week.
The Nigerian Interbank Offered Rate (NIBOR) advanced across all tracked tenors, signalling that market participants anticipate higher long-term borrowing costs despite current surplus liquidity.
The overnight rate rose about 4bps to 20.29%, while the one-, three-, and six-month rates rose 45bps, 77bps, and 126bps to 20.73%, 21.09%, and 21.54%, respectively, Cowry Asset Limited reported.
Market observers note that the widening divergence between stable near-term overnight funding costs and rising forward rates reflects ongoing caution among financial institutions regarding prospective central bank liquidity management policy and future interest rate shifts.
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