Funding Rates Mixed, Banks Deposit N1.6trn at CBN Window
The money market rates closed in mixed directions as deposit money banks (DMBs) took excess funds to the standing deposit facility of the Central Bank (CBN) the absence of liquidity pressures.
The short-term benchmark interest rates were mixed despite huge open market operations conducted as part of efforts to excess amidst growing money supply in the economy. Currency in circulation (CIC) expanded to N5.015 trillion in April 2025, up marginally from N5.003 trillion in March, the CBN data revealed.
In a note, Cordros Capital Limited hinted that activities at the CBN’s Standing Deposit Facility (SDF) window were heightened as banks deposited N1.64 trillion last week at set floor rate.
“The SDF rate serves as a benchmark for the interbank market. When banks have excess liquidity, they are more likely to deposit funds in the SDF rather than lend them to other banks, experts said.
The latest activities at the deposit window ensured that the financial system wrapped the week buoyant, settling at an average net long position of N1.88 trillion, a net long position of N646.50 billion in the previous week.
The market had liquidity due to multiple inflows, including N984.22 billion in OMO maturities, 13% derivation funds, state disbursements, and Sukuk bond allocations.
The CBN moved to reduce excess liquidity with two open market operations where the authority withdrew more than N1.609 trillion from the financial system. Despite the CBN’s liquidity absorption efforts—two N600 billion OMO auctions and net cash reserve ratio debits— system liquidity remained robust.
The OMO auctions attracted strong interest, with N1.146 trillion and N687.13 billion in bids, leading to allotments of N1.127 trillion and N482.33 billion, respectively. Market analysts also noted that N300.69 billion FGN bond and N300 billion Sukuk settlements had minimal impact on rates.
As a result, interbank rates stayed largely stable, with the open repo rate closing unchanged week on week at 26.50% and the overnight lending rate rising slightly by 3 bps to 26.95% on Friday.
The overnight lending rate spike was driven by short-term funding pressures rather than a liquidity squeeze, Cordros Capital Limited said in a note. The Nigerian Interbank Offered Rate (NIBOR) showed mixed movements across tenors on Friday. The overnight and 3-month rates declined by 4bps and 7bps respectively, while the 1-month rate inched up by 1bp.
In the absence of any mop-up activity by the CBN, analysts said they expect inflows from OMO maturities worth N239.15 billion to boost system liquidity in the new week.
In the new week, system liquidity is expected to tighten significantly, driven by the CBN’s scheduled N600 billion OMO auction on June 2 across two tenors: 106-day and 232-day.
Combined with potential Nigerian Treasury bills settlements, these outflows — barring offsetting inflows—could push interbank rates toward 30%. #Funding Rates Mixed, Banks Deposit N1.6trn at CBN Window
