Market Rates Diverge as Financial System Liquidity Fluctuates
In the money market, the short-term interest rates benchmark diverged as the liquidity level in the financial system fluctuated rapidly amidst the Central Bank of Nigeria’s (CBN) market actions.
Inflows from OMO bills totaling N984.22 billion had lifted the funding profile and caused money market rates to trend below 27%. The market also recorded inflows from 13% derivation funds and state disbursements.
Hence, the CBN moved to absorb excess liquidity via a ₦600 billion OMO auction across mid-tenor, which saw ₦687.13 billion in bids and ₦482.33 billion allotted. On Tuesday, the CBN mopped up more than N1 trillion in an OMO offer that was significantly oversubscribed, unlike the midweek auction with tight demand.
The series of outflows, including the ₦300.69 billion Federal Government of Nigeria (FGN) bond settlement, lowered interbank liquidity in the money market while some local lenders scrambled.
The Nigerian Treasury Bills Treasury bill True Yield (NITTY) curve advanced across most tenors, except for the 12-month benchmark, which declined by 5 basis points. Meanwhile, the secondary market for Nigerian Treasury Bills remained bullish, with the average yield falling by 3 basis points to 20.68%.
The Nigerian Interbank Offered Rate (NIBOR) rose across all tenors, reflecting liquidity conditions in the banking system. The overnight, 1-month, 3-month, and 6-month rates climbed by 2 bps, 49 bps, 34 bps, and 50 bps, respectively.
Interbank rates held firm at 26.5%, with the Overnight Policy Rate (OPR) steady at 26.50% and the overnight rate easing 3 bps to 26.86%. In the absence of significant funding pressures, rates are expected to remain stable at current levels tomorrow. #Tinubu Seeks Senate Approval of 2025-2026 External Borrowing Plan of $21.5bn
