Interbank Rates Rise as Financial System Liquidity Moderates
Interbank rates rose as market-funded FX purchases and Nigerian Treasury bill auction payments reduced the amount of liquidity in the financial system. The key money market indicators reacted negatively to liquidity fluctuations in the absence of significant inflows last week.
The interbank market opened the week with a robust liquidity surplus of ₦906.85 billion, supporting stable short-term rates. The liquidity balance was also supported by Nigerian Treasury bills that matured during the week.
However, liquidity declined significantly by ₦603.81 billion to close at ₦303.04 billion due to Central Bank foreign exchange sales settlements, Nigerian Treasury bill auction debits, and Single Treasury Accounts remittances, according to AIICO Capital Limited.
Despite these outflows, market liquidity remained in surplus throughout the week, the investment firm said in its note. Consequently, interbank rates were relatively steady, with only modest upward movement.
The Overnight Policy Rate (OPR) rose by 8 basis points week on week to 26.58%, while the overnight lending rate (O/N) increased by 10 bps week on week to 26.96%.
Overall, the market remained resilient, maintaining stability around the 27% levels, even amid pressure from liquidity-draining activities. The market anticipates that inflow from bond coupon payments worth ₦183.07 billion is expected to boost liquidity levels, with funding rates likely to maintain their current trajectory.
The market experienced pressures on Wednesday following outflows related to the Central Bank cash reserve ratio (CRR) debits. In addition, FX intervention sales settlements drained some of this liquidity, pulling balances down to around ₦340 billion.
The average system liquidity weakened – albeit remaining in the positive terrain—settling at a net long position of N425.84 billion versus a net long position of N1.33 trillion in the previous week, according to Cordros Capital Limited. #Interbank Rates Rise as Financial System Liquidity Moderates First Holdco Falls below N1 Trillion in Equities Market
