Interbank Rates Climb as System Liquidity Surplus Moderates
Interbank rates rose as the financial system’s liquidity surplus moderated due to the Central Bank of Nigeria’s activities in the money market last week.
The short-term benchmark interest rate movement reflects liquidity conditions at the time, ahead of N2 trillion from maturing OMO bills in the new week.
Funding profile reduced despite sustained lodgement at the CBN standing deposit facility (SDF), though banks’ borrowing activities eased in the absence of significant pressures.
A slew of investment firms reported that net liquidity surplus fell to N3.71 trillion from N5.98 trillion in the preceding week.
This happened even following substantial OMO bill repayments of N2.2 trillion and banks’ placement of excess credit with the Apex Bank SDF window.
According to a Cowry Asset Management Limited report, money market liquidity was pressured by the settlement of N969 billion in Nigerian Treasury bills (NTBs).
The firm said N706 billion inflow from matured Treasury bills provided a partial offset. Despite the net liquidity contraction, system liquidity remained comfortably positive at approximately N3.7 trillion.
Consequently, the overnight interbank rate rose by 8bps week-on-week to 20.85%, while the funding rate remained unchanged at 20.40%, Cowry Asset said. Market analysts said this reflected relatively firm short-term funding conditions amid the decline in excess liquidity.
In the interbank market, the Nigerian Interbank Offered Rate (NIBOR) presented a mixed picture, with overnight and one-month rates declining by 7 bps and 5 bps to 20.24% and 20.73%, respectively.
The three-month rate remained unchanged at 21.43%, while the six-month rate advanced by 20bps to 21.91%, according to a report released by Cowry Asset Management Limited.
The firm said the divergence between short-term and longer-tenor rates suggests that while immediate funding pressures remained manageable, market participants continued to demand higher compensation for longer-term interbank exposures.
Money market liquidity is expected to improve, supported by approximately N2.4 trillion in scheduled OMO maturities in the new week, Broadstreet investment firms said in separate reports.
“If these repayments are not substantially offset by fresh CBN sterilisation operations, the resulting liquidity injection could ease overnight funding pressures and moderate short-term money-market rates”.
However, the extent of any repricing will depend on the CBN’s subsequent liquidity management decisions, government borrowing requirements and investor demand at primary auctions, Cowry Asset Limited said. CBN Begins Q4 Auction, Opens N900bn Treasury Bills for Sale
