Financial System Flush with Cash as N4.7trn Surplus Keeps Rates Stable
The financial system was flush with cash, strong enough to keep money market rates stable, supported by FAAC disbursements to states and inflows from matured Treasury and OMO bills.
The strong liquidity profile offset pressures from primary market auction settlements. With about N4.7 trillion in excess liquidity, short-term benchmark interest rates were broadly stable as deposit money banks (DMBs) continued to park funds in the Central Bank’s standing deposit facility (SDF).
The financial system liquidity remained in surplus even after settlement of two open market operations, in which the Apex Bank raised about N3.8 trillion between Monday and Tuesday last week. By midweek, the Central Bank also mopped up N1.2 trillion from Treasury bill sales.
Effectively, the authority sterilised about N5 trillion across OMO and Treasury bill sales between Monday and Wednesday.
Data from the FMDQ platform showed that the Open Repo Rate (OPR) was unchanged at 22.00%, while the Overnight (O/N) Rate eased marginally by 10 basis points to 22.13% from 22.23% in the previous week, reflecting relatively comfortable funding conditions across the banking system.
The financial system closed with a net surplus of N4.68 trillion on Friday, up from N4.33 trillion the previous week, according to investment firm Cowry Asset Limited. Liquidity conditions had softened during the week following the N1.20 trillion debit to settle the Treasury bills auction.
The pressure from the huge outflow was partly offset by inflows from N600 billion in Treasury bills maturities, N900 billion in OMO maturities, and N2.55 trillion in FAAC disbursements.
In the interbank market, the Nigerian Interbank Offered Rate (NIBOR) edged higher across all maturities, reflecting a modest repricing of short-term funding costs following liquidity debits from the T-bills and OMO auction settlements.
The firm reported that overnight NIBOR rose by 2 basis points to 22.21%, while the 1-month, 3-month, and 6-month tenors increased by 4, 14, and 9 basis points to 22.39%, 22.70%, and 22.92%, respectively.
The modest increase suggests cautious liquidity positioning by banks despite the prevailing system liquidity surplus.
In the new week, the market anticipates liquidity conditions to remain relatively comfortable, supported by inflows of approximately N1.63 trillion, comprising N378.43 billion from Treasury bill maturities and N1.25 trillion from OMO bill maturities.
“These maturities should provide sufficient liquidity to keep short-term funding rates broadly stable”, Cowry Asset Limited said. Interest Rate on 364-Day Treasury Bills Drops, CBN Rejects Bids
