Interbank Rates Fall as OMO Bills Credit Boosts Liquidity
Pressures on the short-term benchmark interest rates eased as huge OMO bill inflows or credit boosted liquidity levels in the banking system ahead of the bond auction settlement.
In the absence of a significant shortage, the Nigerian Interbank Offered Rate (NIBOR) trended downward across all tenors ahead of Federal Account Allocation Committee disbursement this week.
Similarly, key money market indicators showed an upward movement, with the open repo rate (OPR) decreasing by 2.40% to 30.00% and the overnight lending rate decreasing by 2.33% to 30.57%.
The banking system rebounded from a 14-day liquidity deficit, opening with a surplus balance of N50.28 billion from a more than N726 billion deficit. This turnaround was primarily driven by inflows worth N813.25 billion from OMO bills maturities, according to investment banking firms AIICO Capital Limited and TrustBanc Financial Group Limited.
As a result, interbank funding rates (OPR and O/N) dropped by over 230 bps, settling at 30.00% and 30.57%, respectively. Analysts expect liquidity conditions to tighten as a result of outflows relating to N910.38 billion bond auction settlement.
This is expected to exert significant pressure on banking liquidity. However, the market expects about 500 billion FAAC disbursements to ease the impending liquidity challenges.
“It is unlikely to keep the system in surplus unless additional inflows emerge,” TrustBanc said in its note. Consequently, interbank rates eased, with the overnight policy rate (OPR) dropping by 2.40% to 30.00% and the overnight rate (O/N) falling by 2.33% to 30.57%.
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