Interbank Rates Diverge as Banks Struggle with Liquidity
Money market rates mixed due to deficit balance in the financial system that caused banks to rely on Central Bank for funding support.
Liquidity shortfall in the financial system reduced banks funding capacity without resulting to borrowing from the Apex Bank. The short term rates in the financial markets have crossed 32% market apiece, reflecting current market condition.
According to data from the FMDQ platform, the Open Repo Rate (OPR) rose by 0.34%, while the Overnight Lending Rate (O/N) fell by 0.10%, closing at 32.41% and 32.72%, respectively. The money market liquidity conditions worsened after huge OMO auction settlement and absence of significant inflows.
With about N102 billion inflows from matured OMO bills yesterday, the liquidity level closed at N1.28 trillion. TrustBanc Financial Group reported that banks borrowed N1.54 trillion to augment tight liquidity condition.
The same issue persisted today in the money market, with more banks now rely on the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF) to raise funds to fund their operations, AIICO Capital Limited said.
Market analysts said they expect the short term benchmark interbank rates to remain elevated in the absence of significant inflow.
“In the near term, we expect liquidity levels to remain depressed, while interbank funding rates remain elevated at current levels”, analysts TrustBanc said in a note.
Today, the Nigerian Interbank Offered Rate (NIBOR) declined across most maturities, except for the Overnight NIBOR, which reflected liquidity constraints within the banking system.#Interbank Rates Diverge as Banks Struggle with Liquidity#
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