Funding Rates Rise as T-Bills Auction Debit Squeezed Liquidity
The money market funding rates heightened as outflows relating to Nigerian Treasury bills auctioned by the Debt Management Office squeezed the liquidity balance in the banking system.
Banks maintained borrowing culture from the Central Bank of Nigeria (CBN) in an effort to meet their daily liquidity demand in a day money market. The financial system showed a marginal improvement but continued to operate at a deficit, affected by the net Treasury bills auction settlement debit of around N518.93 billion.
The liquidity constraint in the money market caused an adjustment to the short-term benchmark interest rates. The Nigerian Interbank Offered Rate (NIBOR) rose across most maturities due to inadequate liquidity in the financial system.
Analysts reported that the banking system deficit tightened by 59% to close at ₦148.28 billion from N93.5 billion amidst banks increasing demand for liquidity to fund operations. Specifically, outflows relating to Nigerian Treasury bills auction settlement worth ₦489.20 billion dragged the money market funding profile lower on the day.
This happened despite substantial statutory inflows, according to analysts’ notes from AIICO Capital Limited. Hence, key money market rates such as the open repo rate (OPR) and overnight lending rate rose by 0.92% and 1.21%, closing at 30.50% and 31.67%, respectively.
Interbank rates are expected to stay at their current levels unless there are significant changes in the market, analysts said. #Funding Rates Rise as T-Bills Auction Debit Squeezed Liquidity Oil Prices Decline Amidst Lower U.S Inventories Draw
