Money Market Rates Diverge as FX Settlement Reduces Liquidity

Money Market Rates Diverge as FX Settlement Reduces Liquidity

Money market rates diverged on the back of sufficient liquidity in the banking system despite foreign exchange intervention sales settlement by the Central Bank of Nigeria (CBN) on Tuesday.

The liquidity balance in the financial system slowed down to approximately ₦757 billion after outflow for the naira equivalent of US dollar sales to banks. The CBN’s intervention in the FX market, totaling $321.71 million in two days, dragged liquidity downward and exerted near zero pressure on rate pricing.

As a result, the overnight lending rate contracted by a basis point to close at 26.9% in the absence of any significant funding pressure on the system. Hence, the Nigerian Interbank Offered Rate declined across most tenors, indicating liquidity in the banking system still remained sufficient for money market activities.

The Open Repo Rate (OPR) rose by 0.40% to 26.90%, while the Overnight Lending Rate edged down by 0.41% to 26.54%. The Nigerian interbank treasury bills true yield displayed mixed trends across tenors, while the secondary market for Nigerian treasury bills turned bearish. # Money Market Rates Diverge after FX Settlement

Interbank rates are likely to rise slightly tomorrow as liquidity tightens due to additional CBN FX settlement outflows, analysts said in their separate notes. #Money Market Diverge as FX Settlement Reduces Liquidity