Liquidity Eases as Banks Placement at CBN Window Drops by 25%
Deposit money banks (DMBs) placement at the Central Bank of Nigeria (CBN) Standing Deposit Facility (SDF) window declined by about 25%, according to money market reports reviewed by MarketForces Africa.
However, the financial system remains sufficiently liquid in the absence of an open market operation, though midweek Treasury bill auction settlement is anticipated to reduce the flow.
In separate market updates, investment firms said the financial system liquidity opened the week in a strong surplus position of ₦6.16 trillion, reflecting a ₦706.69 billion increase from the previous week’s close.
The robust funding profile was driven mainly by ₦2.12 trillion OMO maturities. Banks scale back placement at the CBN SDF window. The amount placed at the window reduced by 24.95% to N3.94 trillion, according to Meristem Securities Limited.
Despite ample liquidity, the average funding cost rose to 22.16%, while the overnight rate increased to 22.31%, and the open repo rate remained at 22.00%.
Nigerian Interbank Offered Rates climbed across all tenors on Wednesday, with the overnight rate ticking up 4bps to 22.32%, pointing to tightening system liquidity.
The 1-month, 3-month, and 6-month tenors followed suit, rising 10bps, 43bps, and 74bps respectively, Cowry Asset Management said in a note.
The investment firm stated that funding costs mirrored this trend, as the Overnight rate edged higher by 6bps to 22.31% while the Open Repo rate held firm at 22.00% on Wednesday. CBN Slices Interest Rates on 182, 364-Day Treasury bills
