Funding Costs Ease as Banking System Liquidity Increases

Funding Costs Ease as Banking System Liquidity Increases

Funding costs eased as banking system liquidity increased following OMO repayment and inflow from matured Treasury bills amidst renewed deposit placement at the Central Bank window.

In the money market, funding level increased to N3.04 trillion, an increase of N1.1 trillion from the previous level following a surge in placement at the Standing Deposit Facility (SDF) of the Apex Bank.

The market liquidity opened the day with a surplus balance of ₦3.0 trillion, AIICO Capital Limited said in a report, keeping the short-term benchmark interest behind the floor rate.

Analysts at AIICO Capital Limited attributed liquidity improvement to ₦871.4 billion increase in Deposit Money Banks’ (DMBs) placement in the Standing Deposit Facility (SDF) window, settling at ₦2.9 trillion.

The market also recorded ₦450 billion inflow following Open Market Operation bills maturity. Interbank rates expected to remain as similar level amidst an expected inflow of ₦805.9 billion from matured Treasury bill inflow and then auction settlement.

Nigerian Interbank Offered Rates declined across all tenors on Wednesday, with the overnight rate falling 2 basis points to 22.78%, driven by improved banking system liquidity.

Money market costs showed mixed trends: the Overnight rate eased 4 basis points to 22.75%, while the Open Repo Rate held at 22.50%.

The Nigerian Treasury bills average yield fell 1 basis point to 16.82%, indicating favourable investor sentiment despite cautious short-term positioning. Guinness Nigeria Sees Strong Repricing in Fresh Rally