Interbank Rates Decline on Strong Liquidity Balance
Interbank bank rates continue its downward trend in the money market on sufficient liquidity balance in the financial system. The short-term benchmark interest rates declined after the Debt Office monthly bond auction.
Interbank rates are expected to take a 360-degree turn this week due to outflow relating to auction settlement. The market also expect midweek Treasury bill auction to drag liquidity downward.
This week, FGN bond coupon worth N9.37 billion will boost the liquidity in the market. Also, additional inflows from OMO maturities worth N6.38 billion will provide additional cover for rates pricing in the money market.
Due to outsize outflow versus moderate inflow, net liquidity level is projected to be weak, with estimates showing interbank rates around 30%. The market opened the new week with robust liquidity level after inflows from Remita, FGN bond coupon payments reduced funding pressures last week.
The average system liquidity settled at a net short position of N57.77 billion, open stronger in the new week following late hour’s inflows on Friday. Banks were note to access about N1.8 trillion from the Central Bank of Nigeria’s (CBN) Standing Lending Facility to meet funding requirements.
Money market rates declined below 26% market apiece as the banking system opened the week with a surplus balance of ₦312.31 billion. According to information from the FMDQ platform, the , the open rate (OPR) fell by 91 basis points to 25.18%, while the overnight lending rate (O/N) decreased by 1.19% to 25.69%.
Analysts said they expect the liquidity in the system to hover around current levels, until Wednesday when the settlement of FGN bond auction worth N346.15 billion will reduce available liquidity, driving interbank rates higher.
“We expect interbank rates to remain stable but trend higher on Wednesday due to the FGN bond auction settlement”, AIICO Capital Limited said in a note. The Nigerian Interbank Offered Rate (NIBOR) rose across most maturities, with the exception of the Overnight NIBOR, which declined by 1.29% to settle at 25.09%, reflecting improved liquidity in the banking system, Cowry Asset Limited said.
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