Liquidity: Banks Reprice Short Term Interest Rates
The money market rates tightened further due to sustained pressures on liquidity balance in the financial system.
The Short-term benchmark interest rates have adjusted upward due to the Apex Bank recent decision to raise the monetary policy rate higher 27.25%.
Banks are adjusting to the new dictates, demanding for higher rates to part with the free funds as most tier-2 lenders have become net borrowers.
In a note Cowry Asset Limited said Nigerian interbank offered rate (NIBOR) rose across all maturities with banks holding reserves aiming to capitalize on higher rates.
Key money market rates such as the Open Repo Rate (OPR) and Overnight Lending Rate (O/N) increased by 0.95% and 0.96% to close at 28.98 and 29.68.
Due to strain on funding level, transaction at the money market environment was conducted at higher rates.
The significant increase in rates followed a new market dynamics initiated on the back of series of outflows despite absence of significant inflows from matured instrument to saturated the financial system and cover up gap in funding level.
Analysts are expecting rates to increase today as the Central Bank of Nigeria (CBN) plans to sell N500 billion worth of OMO bills across standard maturities.
The expected outflow from the OMO auction would have substantial impacts that would increase liquidity pressure in the financial system, analysts said.
Market liquidity closed positive at N698.billion on Friday, said Coronation Research in a note. Analysts said Call, overnight, and repo rates closed within the range of 7.5% – 30% as rates in the market tightened. #Liquidity: Banks Reprice Short Term Interest Rates
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