Interbank Rates Increase Ahead of Liquid February

Interbank Rates Increase Ahead of Liquid February

Interbank rates increased as liquidity balance in the financial system dropped as a result of outflows relating to the settlement of Federal Government of Nigeria (FGN) bonds sold at the beginning of the week.

Rates are projected to close higher ahead of heavy inflows in February, where a sum of N3.5 trillion is expected to boost the financial system’s iquidity profile. Atiku Audu, Chief Investment Officer at ARM Pension Managers, revealed in a LinkedIn post.

In the absence of additional inflows, the money market rates increased, as confirmed by data from the FMDQ platform. The short-term benchmark interest rates reacted to the settlement of the FGN Bond auction worth ₦601.04 billion.

The amounts taken out of the banking system left a surplus balance of ₦129.63 billion amidst a slowdown in borrowing from the Central Bank. The low funding gap in the market restrained local deposit money banks from accessing funds from the Standing Lending Facility.

The Nigerian Interbank Offered Rate (NIBOR) displayed mixed trends across tenors. The overnight and 6-month rates increased by 0.81% and 0.15%, closing at 27.67% and 29.08%, respectively, according to Cowry Asset Limited.

Conversely, the 1-month and 3-month rates declined by 0.11% and 0.27%, settling at 27.25% and 28.18%, respectively. Similarly, key money market indicators, including the open repo rate (OPR) and the overnight lending rate, rose by 0.44% and 0.50%, closing at 26.94% and 27.50%, respectively.

Unless there are unexpected significant outflows, the current liquidity balance is expected to remain stable, with funding rates likely to hover around current levels, TrustBanc Financial Group Limited said in a note.

Next month, a total of N3.5 trillion is expected in the banking system. The amount that is expected to come across debt market instruments would boost liquidity by N3.5 trillion.

2031 FGN bond coupon payment worth N196 billion will flow into the money market, Feb 2028 will add N114 billion, and N142 billion is expected from the 2034 bond coupon payment.

On the Treasury bills side, the market expects N955 billion worth of Nigerian Treasury bills to flow into the space. The Treasury bill maturing on Feb 20 will raise the amount by N1.3 trillion. A total sum of N813 billion is expected to saturate the financial system on Feb 25. #Interbank Rates Increase Ahead of Liquid February IAS 29: Nigeria Not Hyperinflation Economy – Financial Reporting Council