Funding Rates Edge Up, Banks Borrow from CBN
Funding rates edged up in the money market as most Nigerian deposit money banks continued their quest for liquidity to meet their funding obligations, Cowry Asset Limited said in a note.
Last week, banks ramped up N3.4 trillion from the Central Bank of Nigeria (CBN) standing lending facility (SLF) to meet their respective liquidity requirements, according to Afrinvest Limited.
The huge funds access lifted the liquidity level in the financial system, closing at N1.1 trillion, 75.3% higher than the prior week’s level.
The amounts was supported by primary market repayment of ₦858 billion and Standing Lending Facility totaling ₦3.4 trillion, according to Afrinvest. Despite the inflows, short term benchmark interest rates climbed above 30% following debits for the May 2024 FGN bond auction worth N682.07 billion.
Liquidity level was further impacted by cash reserve ratio maintenance and CBN’s FX sales during the week. Last week, the average system liquidity closed at a net long position of N834.21 billion from a net long position of N401.26 billion in the prior week.
Again, deposit money banks have started to raise funds from the CBN window this week due to insufficient liquidity in the system. This has negative impacts on the Nigerian interbank borrowing rate (NIBOR) which saw a significant uptick of 8 percentage points to reach 30.96%, according to Cowry Asset Limited.
The investment firm stated also that the 1-month, 3-month, and 6-month interbank borrowing rates experienced upward movements to 24.50%, 24.83%, and 26.04%, respectively.
Data from FMDQ Exchange revealed that key money market rates, like the open repo rate (OPR) and overnight lending rate saw modest shifts to 31.47% and 32.07% as demands for funds increased amidst weak liquidity in the system.
Analysts at Cordros Capital Limited expect inflows from this month’s FAAC disbursements worth N817.67 billion to support financial system liquidity this week and thus, anticipate the overnight lending rate would temper from current levels. #Funding Rates Edge Up, Banks Borrow from CBN
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