Liquidity Deficit Keeps Money Market Rates Elevated
A liquidity deficit in the banking system kept money market rates elevated in the absence of significant inflows from maturing instruments. The Apex bank’s significant funding mop-up via its recent past open market operations and Treasury bill activity reduced the amount of free funds in the system.
Though there were no primary market activities last week, the liquidity positions in the money market failed to improve in the absence of related inflows from other sources, and the resource allocation mechanism caused rates to inch higher to double-digit highs.
Banks have continued to access funds from the Central Bank of Nigeria (CBN) standing lending facility due to a liquidity squeeze following N153 billion debit for FX intervention sales in the recent past week.
The financial system opened at about N95 billion deficit, which is expected to increase further until N1 trillion in inflows from OMO and Treasury bills matures during the week.
Analysts said barring any significant inflows into system liquidity, funding costs remained elevated. Data from the FMDQ platform showed that the open repo rate (OPR) edged higher by 30 basis points to 32.40% on Monday.
Also, the overnight lending rate increased by 30 basis points to 32.70% ahead of fresh inflows. Rates are expected to remain at a similar level, except for any significant inflows.
Funding rates were significantly affected last week due to a liquidity shortfall. The overnight rate surged to 32.40% (from 27.00%), and the open repo rate rose to 32.10% (from 26.50%). #Liquidity Deficit Keeps Money Market Rates Elevated OMO, T-Bills Yields Ease as Investors Boost Holdings
