Money Market Liquidity Dips as CBN Debits Banks for CRR
The financial system liquidity dipped on Monday as the Central Bank of Nigeria (CBN) debited banks’ cash reserve ratio (CRR) requirement on deposits collected but not disbursed as loans.
The tightened liquidity heightened funding costs amidst the Debt Management Office (DMO) monthly bond auction conducted at the beginning of the week.
The CBN CRR debit reduced banks’ daily liquidity positions, cut back activities at the standing deposit facility, keeping money market rates on edge.
Data from the FMDQ showed that short-term benchmark interest rates increased, and market liquidity opened in a credit balance of ₦1.82 trillion, representing a sharp decline of ₦2.82 trillion from Friday’s closing level.
Consequently, funding rates decreased marginally – open repo or buy-back steady at 22% while the overnight lending rate increased by 5 basis points to 22.18%.
Banking system liquidity is expected to remain relatively comfortable, supported by anticipated inflows of approximately N1.63 trillion, comprising N378.43 billion in Treasury bill maturities and N1.25 trillion in OMO bill maturities.
Market analysts said these maturities should provide sufficient liquidity to keep short-term funding rates broadly stable. However, the scheduled FGN Bond auction and settlement could partially absorb system liquidity, limiting the extent of any decline in money market rates.
System liquidity expanded by N306.37 billion week on week to N4.63 trillion last week, as inflows from OMO and Nigerian Treasury bills maturities outweighed outflows for auction settlements.
The Open Repo Rate was flat at 22.00%, while the Overnight Rate eased 10 bps to 22.13%. DMO Raises N932bn in FGN Bonds on Tight Pricing Discipline
