Interbank Rates Fall as Remita Inflow, CRR Refund Boost Liquidity
Nigeria’s banks borrowing activities at the Central Bank of Nigeria’s (CBN) standing lending facility (SLF) reduced as liquidity levels in the financial system improved sharply. In their separate notes, analysts said the latest round of inflows in the money market altered the short-term benchmark interest direction.
While funding rates remained elevated, the market recorded a significant slide on the day ahead of the auction of N530 billion worth of Nigerian Treasury bills. Rates declined as Remita inflows, cash reserve credit, and coupon payments on FGN bonds boosted liquidity levels in the banking system.
The financial system liquidity experienced a significant recovery due to inflows from Remita, net cash reserve ratio (CRR) credits, and FGN bond coupons. The Nigerian Interbank Offered Rate (NIBOR) experienced a decline, reflecting liquidity in the banking system.
Consequently, the open rate (OPR) fell by 1.84% to 30.54%, while the overnight lending rate (O/N) decreased by 1.75% to 31.00%. Interbank rates are expected to remain stable unless there are significant changes, analysts at AIICO Capital Limited said in a note. On Tuesday, the banking system rebounded from a six-day deficit streak, opening with a surplus balance of N219.18 billion.
This improvement was largely attributed to a 42% reduction in outflows from the Standing Lending Facility (SLF) window and an inflow of ₦91.09 billion from bond coupon payments, TrustBanc Financial Group Limited said in a note.
Given the current liquidity conditions, analysts said they expect interbank funding rates to remain around these levels as the system prepares for the Nigerian Treasury bills auction worth ₦530 billion tomorrow. #Interbank Rates Fall as Remita Inflow, CRR Refund Boost Liquidity
