Interbank Rates Crash over Banks Excess Liquidity
Interbank rates plunged significantly as pressure on the money market continued to ease following a spike in inflows. On Thursday, liquidity balance in the financial system expanded above local banks funding requirements.
System liquidity remained positive and improved despite today’s foreign exchange (FX) settlement with funding rates falling significantly. Market data, report revealed that he liquidity balance in the financial system increased by 31%, ending the month with a strong surplus balance of ₦466.59 billion.
Some analysts said the money market witnessed low outflow relating to primary market auction sales, especially OMO bills, in contrast to Sept experience. Unlike in Oct, three Open Market Operation (OMO) auctions were held in response to significant inflows from FAAC and coupon payments last month.
Hence, the Nigerian interbank borrowing rates (NIBOR) fell across all maturities, signaling improved liquidity in the banking system, Cowry Asset Limited said in an update. The short term benchmark interest rates declined below 22% for the first time in weeks over relatively excess liquidity holdings by banks.
In the absence of significant funding pressures, the Open Repo Rate (OPR) fell by 317 basis points to close at 21.14% in the money market today. Also, the overnight lending rate (O/N), also dropped by 355 basis points to close at 21.45%, while the access rate from the standing lending facility of the central bank remained unchanged at 31.75%.
In its market update, CardinalStone Limited confirmed that money market rates slid as system liquidity was bolstered by operators’ activities at the Standard Deposit Facility (SDF) window.
Financial market liquidity pressure started dropping since last week. On Friday, the banking system ended the week with a surplus balance of ₦183.98 billion, primarily due to FAAC disbursements and a CRR refund of N154 billion. These inflows provided much-needed relief after 11 days of tight liquidity, TrustBanc Financial Group said in an update.
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