Interbank Rates Mixed as Outflow for FGN Bond Reduces Liquidity
The interbank rates diverged in the money market due to the outflow for the Federal Government of Nigeria (FGN) bond auction that left the financial system. The market reacted to a 50 basis point interest rate hike, which is expected to push the rate higher at the standing lending facility of the apex.
The financial system was debited with a total sum of N264.53 billion, being the investors’ payment for FGN bonds sold to market participants by the Debt Management Office. The debt office had on Monday conducted a primary market auction where it offered N150 billion worth of government borrowing instruments to market actors.
The auction was oversubscribed as investors’ appetite was boosted by expectations of rate adjustment, disinflation, and a bond supply slowdown. Hence, the total outflow increased negative balance in the financial market to N710.9 billion from N188.14 billion on Tuesday, according to Futureview Financial Limited.
Opening system liquidity declined due to debits for the FGN bond auction. As a result, the interbank rates showed a mixed number. The Open Repo Rate (OPR) decreased by 5 bps to 20.28%, while the Overnight Rate (ON) increased by 7 bps to 20.95%, data from the FMDQ platform confirmed.
The adjustment to the monetary policy rate will have market wide impacts, analysts told MarketForces Africa, noting that banks with strong cash profiles will obtain or request a higher rate from the net borrowers lenders.
Nigerian interbank offered rate (NIBOR) increased across all maturities, signaling system illiquidity, according to Cowry Asset Limited. #Interbank Rates Mixed as Outflow for FGN Bond Reduces Liquidity Lifting Petrol from Dangote Refinery ‘ll Moderate FX Pressure, says Cardoso
