Liquidity Deficit in Banking System Keeps Interbank Rates Elevated
The liquidity deficit in the banking system kept the short-term benchmark interest rates elevated in the money market. Data revealed that the liquidity shortfall has reduced on Thursday as inflows from Federal Allocation Committee credit hit the financial system.
While the banking system liquidity improved, the money market ended the day negative with more than N700 billion in deficit. As a result, interbank rates remained elevated, with the Overnight Policy Rate (OPR) recording a 16 basis point increase on the day to settle at 32.29%.
Data from the FMDQ platform also confirmed that the overnight lending rate (O/N) surged by 12 basis points at 32.79% in the absence of significant inflows from matured financial instruments.
The money market reflected liquidity in the system, driven by FAAC inflows, as the Nigerian Interbank Offered Rate (NIBOR) declined across all maturities, investment banking firm Cowry Asset Limited said in a note.
The liquidity shortfall has persisted for the ninth consecutive day, opening at ₦700.5 billion negative, a 31% improvement from the previous day’s balance, TrustBanc Financial Group explained in its note.
Funding crunch forced some local banks to liquidate their Treasury bills instruments as elevated standing lending facilitate rates continue to impact operators costs of funds.
In the absence of significant inflows, market analysts anticipate liquidity conditions would remain constrained, with funding rates likely hovering at similar levels. #Liquidity Deficit in Banking System Keeps Interbank Rates Elevated Improved Tax-to-GDP Ratio will Actualise Budget Ambitions – LCCI
