Interbank Rates Slow as Remita, FAAC Credits Boost Liquidity
Interbank rates slowed down, trended around 27% in the money market, on the back of sufficient liquidity balance in the financial system.
The short term benchmark interest rates movement were in check in the just concluded due to robust liquidity in the financial system.
Analysts expect the trend to persist barring any surprise debits for cash reserves maintenance or any liquidity management moves by the Apex Bank in the new week.
Last week, local deposit money banks borrowing from the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF) was minimal due to sizeable funding profile in position.
In its note, Afrinvest Limited said liquidity injection through the Standing Lending Facility worth N354.2 billion hit the system. Cash-rich deposit money banks were noted to be demanding for higher rates on their free funds.
MarketForces Africa review showed that liquidity level in the money market peaked at N807.4 billion mid-week from N451.1 billion at the beginning of the week and closed at N632.4 billion on Friday.
The average system liquidity for the week settled at a net long position of N628.56 billion as against net short position of N325.66 billion in the prior week, according to Cordros Capital Limited.
Hence, Nigerian Interbank Offered Rate (NIBOR) increased across all maturities, signaling illiquidity within the banking system, Cowry Asset Limited said.
Market analysts at AIICO Capital Limited attributed solid liquidity balance in the financial system to a new FAAC disbursements, Remita inflows, and other market credits.
“This week, the daily system balance averaged N600 billion, reaching its highest point at N803.7 billion on Wednesday due to FAAC inflows”, TrustBanc Financial Group said in a note.
During the week, the financial system liquidity level however tightened following huge Treasury and OMO bills primary markets auction settlements.
Even with that, the repo rate and overnight lending rate ended the week lower at 27.7% and 28.2% respectively, compared to 29.3% and 29.9% in the previous week.
Barring any liquidity management measures by the CBN, Cordros Capital Limited expects the inflows from OMO maturities worth N125.80 billion to further support system liquidity, and drive the overnight lending rate lower. #Interbank Rates Slow as Remita, FAAC Credits Boost Liquidity#
