Funding Rates Steady ahead of N1.14 trillion OMO Inflows
Ahead of settlement for Sukuk, the short-term benchmark interest rates were steadied amidst tight liquidity levels in the money market ahead of N1.14 trillion inflows from OMO bills maturities on Tuesday.
Money market rates hovered around 26.5% level in the absence of significant pressures on liquidity levels in the financial system. Interbank rates are expected to hold steady at 26.5%, supported by anticipated system liquidity from ₦1.14 trillion in OMO maturities.
The Nigerian Interbank Offered Rate (NIBOR) for the overnight tenor held steady at 26.83% on Monday, reflecting mild liquidity inflows into the system.
However, other tenors witnessed a downward movement as the 1-month, 3-month, and 6-month rates fell to 26.97%, 27.69%, and 28.20%, respectively, Cowry Asset Limited said in its investor note.
Key money market benchmark rates such as the Open Repo Rate (OPR) and Overnight Lending Rate (OVN) also remained unchanged, closing at 26.50% and 26.96%, respectively, ahead of the Central Bank of Nigeria’s (CBN) policy announcement.
The Nigerian Interbank Treasury Bills True Yield curve advanced across all tenors, gaining 27 bps, 17 bps, 70 bps, and 5 bps across the one-month, 3-month, 6-month, and 12-month benchmarks, respectively.
This comes amid improved investor appetite for shorter-term instruments. Despite the upward pressure on the NITTY curve, the secondary market for Nigerian Treasury Bills was modestly bullish, with average yields retreating by 23 bps to close at 20.81%, indicating sustained demand for short-dated instruments.
Funding costs fluctuated throughout last week, starting with mild upward pressure due to reduced system liquidity caused by net FX settlements.
The short-term benchmark rates peaked midweek as banks increased reliance on the standing lending facility (SLF) window, with market liquidity dipping to about ₦77.00 billion.
However, coupon inflows of ₦175.60 billion from the FGN May 2033 bond helped ease pressure, improving liquidity and moderating rates.
Hence, market liquidity closed the week stronger at ₦423.90 billion, CSL Stockbrokers Limited said in its market update. Consequently, the average funding rate held steady at 26.73%, with the open repo rate remaining at 26.50%, while the overnight lending rate edged up by a basis point to settle at 26.96%.
Analysts at CSL Stockbroker Limited noted that settlement for the Sukuk primary issuance is likely to pressure funding rates, though expected inflows from the FGN 2029 coupon payments and maturing OMO bills should help cushion liquidity pressures this week. Oil Prices Edge Lower Over Demand, Supply Imbalance
