Interbank Rates Mixed on Surplus Banking System Liquidity
Interbank rates were mixed as liquidity balance in the financial system remained substantial to meet banks’ and other financial service players funding demand. Data from the FMDQ platform revealed that the short-term interest rates closed around 26% in the absence of significant funding pressures in the money market on Wednesday.
Banks borrowing activities at the Central Bank of Nigeria’s (CBN) standing lending facility (SLF) also slowed, while there have been significant inflows channeled into the deposit facility.
Hence, Nigerian Interbank Offered Rate (NIBOR) declined across all tenors, indicating improved liquidity conditions in the banking system.
Investment firms said in their respective reports that interbank liquidity surged after FAAC disbursements; FGN bond coupon payments, and large Remita inflows from the CBN partially offset yesterday’s FX settlement outflows.
Key money market indicators were mixed. The open repo rate remained flat at 26.50%, while the overnight lending rate fell by 0.08 percentage points to close at 26.88%.
The Nigerian Interbank Treasury Bills True Yield declined across most tenors, reflecting subdued investor sentiment, with the average yield closing at 21.04%.
Robust liquidity in the financial system kept rates anchored near 26.5% today, with the Overnight Policy Rate (OPR) holding at 26.50% and the Overnight Rate dipping 8 bps to 26.88%.
On Tuesday, the liquidity in the banking system opened on a strong footing, up by 464% to open at N374.3 billion, reflecting the impact of FAAC disbursements worth N500 billion credited into the system last Thursday.
In response, the interbank funding rates dropped significantly, with the open repo and overnight rates declining by about 500bps to settle at 26.50% and 26.96%, respectively.
In the absence of significant outflows from the system, liquidity conditions are expected to remain buoyant, with interbank rates likely to hover around current levels in the near term. #Interbank Rates Mixed on Surplus Banking System Liquidity Nigeria’s FX Reserves Drop by $3bn, Hit 6-Month Low
