Funding Pressure from Squeezed Liquidity Drives Banks to CBN Facility
Godwin Emefiele, CBN Governor

Funding Pressure from Squeezed Liquidity Drives Banks to CBN Facility

Persist funding pressures from squeezed financial system liquidity has continued to bite as interbank rate recorded an uptick thus drive deposit money banks into the Central Bank (CBN) standing lending facility.

In the money market segment on Wednesday, rates remained elevated for lack of free cash inflow into the financial system.

Analysts at Chapel Hill Denham said in a report that the development kept many banks in the Standing Lending Facility (SLF) window as open buy back and overnight rate rise.

It was noted that the financial system liquidity opened in a deficit of N407.5 billion, from N32.7 billion on Tuesday. Consequently, the open buy back rate increased by 50 basis points (bps) to 15.00%.

Meanwhile the overnight rate closed flat at 15.50% s analysts at Chapel Hill Denham express view that interbank funding pressures will likely remain elevated this week.

In a related development, sentiments remained mildly bearish in the fixed income market, particularly in the bond segment, according to traders.

At the front end of the curve, the Nigerian Treasury Bills benchmark eased marginally by 4 basis points to 4.19%, which analysts attributed to repricing of NOV-21 (-43bps to 4.00%).

Whereas, analysts said the open market operations (OMO) benchmark curve expanded by 6 basis points to 7.70% due to selling pressures on long-day to maturity, up 14bps to 9.19%.

However, yields expanded in the bond market by an average of 12 basis points to 13.00% on the benchmark curve, attributed to selling pressures at the belly of the curve, rising 29bps to 13.20%.

Meanwhile, the Nigerian local currency, naira, continued to trade within a tight band at all segments of the foreign exchange (FX) market.

In the Investors and Exporters Window, the local currency strengthened against the United States dollar (USD_ by 0.12% or 50 kobo to close at N410.50.

However, exchange rate remained unchanged in the official and Secondary Market Intervention Sale (SMIS) segments at N379.00 and N380.69 respectively.

Similarly, the pair traded flat at N485.00 in the parallel market as the nation’s external reserves extended decline, closing lower by 0.6% wow to US$34.88 billion.

Funding Pressure Sustained as Spot Rate on T-Bills Jumps to 9%

Funding Pressure from Squeezed Liquidity Drives Banks to CBN Facility