Liquidity: Interbank Rates Dip Below 25% after MPR Corridor Adjustment

Liquidity: Interbank Rates Dip Below 25% after MPR Corridor Adjustment

Interbank rates declined below 25% as robust liquidity levels in the financial system reduced pressure on funding costs, reflecting absence of the Central Bank open market operation.

In the recent past week, the authority has allowed inflows from OMO bill repayments to flood the financial system, and this has strengthened the funding position in the money market.

Local deposit money banks have continued to sterilse excess funds via placement with the CBN, earning a return that is currently above the rate on Nigerian Treasury bills.

Supported by fresh inflows, the financial system liquidity increased by N587 billion to N3.825 trillion on Wednesday, according to market data released by AIICO Capital Limited

The firm reported that the interbank market opened stronger, supported by robust system liquidity.

The increased liquidity following a N978.6 billion inflow into the Standard Deposit Facility (SDF) on Wednesday driven by the Central Bank Monetary Policy Committee adjustment of the asymmetric corridor.

At the just concluded meeting, the CBN committee adjusted the asymmetric corridor around the monetary policy rate to +250 bps/-250 bps from +500 bps/-100 bps.

In a commentary note, CardinalStone Securities Limited said the adjustments imply that banks will now borrow from the CBN at 29.5%. However, banks’ deposited funds with the Apex Bank will attract 24.5%.

With about N4 trillion liquidity in the financial system, the short-term interest rate benchmark fell in the absence of significant pressures. The Open Repo Rate (OPR) and Overnight Rate (OVN) declined by 100 bp to 24.50% and 104 bps to 24.88%, respectively.

Analysts expect interbank rates to decline further barring any funding pressure and the expected inflow of ₦201.4 billion from the maturity of 25-Sept-2025 bill.

The Treasury Bills secondary market displayed contrasting movements via the Nigerian Interbank Treasury Bills True Yield.

Yields on 1-month, 3-month, and 12-month instruments increased by 5 bps, 12 bps, and 13 bps, respectively, while the 6-month yield bucked the trend by falling 13 bps. #Naira Declines, Analysts Anticipate Robust Foreign Reserves

Nonetheless, the average Nigerian Treasury Bills yield edged down 1 bp to 18.36%, reflecting improved investor sentiment and confidence in the secondary Treasury Bills market despite the mixed tenor performance. #Liquidity: Interbank Rates Dip Below 25% after MPR Corridor Adjustment