Excess Liquidity in Banking System Tightens Short-Term Rates
Excess liquidity level in the banking system has continued to tighten short-term benchmark interest rates movement in the money market.
Interbank rates were relatively lower, reflecting the surplus liquidity position experienced since last week. Despite this, the Central Bank has not conducted open market operation as anticipated, leaving excess liquidity to continue to flow.
Investment firm said the market saw limited activity with rates holding steady at 26.5%. The short term benchmark interest rates, a gauge for money market indicators were lower in the absence of significant funding pressure.
Banks borrowing activities have eased, and the market is witnessing increasing fund sterilisation via standing deposit facility of the Central Bank of Nigeria.
The amount in the financial system reduced to N1.875 trillion on Tuesday, as per CBN data cited by AIICO Capital Limited in its note, down from N more than N1.961 trillion.
Hence, Nigerian interbank borrowing rate (NIBOR) declined across all maturities, with the Overnight rate dropping by 14 basis points to 26.81%, according to Cowry Asset Limited.
Analysts also noted that NIBOR for 3-month, 6-month, and 12-month rates decreased by 2, 2, and 8 basis points, respectively, supported by inflows of ₦600 billion OMO Bills maturity this week.
Money market rates showed mixed dynamics, with the overnight rate falling by 3 basis points to 26.92%, while the open repo rate (OPR) held steady at 26.50%.
In contrast, the Nigerian Interbank Treasury Bills True Yield exhibited varied performance, with yields on the 1- month and 3-month tenors rising by 3 and 13 basis points, respectively.
The average yield for NT-Bills increased by 4 basis points to 18.75%, indicating ongoing weak and negative investor sentiment in the secondary market. #Excess Liquidity in Banking System Tightens Short-Term Rates
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