Interbank Funding Rates Diverge on Surplus Financial System Liquidity
Interbank funding rates diverge amid surplus liquidity in the financial system, reflecting the absence of significant pressure in the money market.
Deposit Money Banks (DMBs) activities at the Central Bank of Nigeria (CBN) Standing Deposit Facility (SDF) remain strong, though placements at the window slow following primary market auction debits.
Market liquidity opened the day in a credit balance of ₦3.23 trillion, representing an increase of ₦119.54 billion from Tuesday’s level, Meristem Securities Limited said in a commentary note.
Market analysts attributed this liquidity condition to the net effect of ₦1.9 trillion in FAAC payments and ₦929.32 billion bond auction settlement.
Despite improved system liquidity, the interbank market closed negative on Wednesday as the overnight Nigerian Interbank Offered Rate (NIBOR) rose 3bps to 22.28%, investment firm Cowry Asset Limited said in its market update.
The firm said longer-dated tenors also advanced, with 1-month and 3-month rates gaining 14 bps and 2 bps respectively, though the 12-month rate bucked the trend by dropping 5 bps.
Meanwhile, short-term funding costs diverged as the Overnight rate ticked up 2bps to 22.23% while the Open Repo rate remained unchanged at 22.00%, according to FMDQ market data.
Barring any major liquidity intervention, interbank funding rates are expected to remain around current levels, supported by ₦378.43 billion in Treasury bills maturities, Herwood Capital Limited revealed.
An estimated N2.76 trillion is expected to flow into the financial system this week, with OMO maturities accounting for about 79% of the projected inflows.
Meanwhile, the Nigerian Treasury Bills secondary market delivered mixed performance across maturities. Yields on the 1-month and 6-month papers climbed by 2bps and 36bps, respectively.
Whereas yields on the 3-month and 12-month bills fell by 17bps and 6bps. Robust trading activity and firm investor demand ultimately pulled the average yield on all Treasury bills down by 1bp to 18.16%.
