Money Market Rates Climb over Negative Liquidity Balance
Money market rates climbed on the back of a deficit liquidity balance in the financial system. The market has consistently kept rates higher in the absence of significant inflows that could upturn the negative liquidity.
Reflecting the previous trend, investment firms reported that system liquidity improved but rates remain on the high side. In its market update, AIICO Capital Limited said liquidity balance improved slightly as Federal Account Allocation Committee (FAAC) inflows or credits begun to come in gradually.
Banks have been accessing funds from the Central Bank of Nigeria (CBN) at 31.75%, a new rate set after the Apex Bank lifted suspension on its borrowing window. A slew of investment firms stated that the financial market has liquidity deficit without mentioning the amount. Many banks bridged funding gap with borrowings from the CBN and interbank deposits.
Data from the FMDQ platform showed that the overnight policy rate (OPR) and the overnight rate (O/N) increased by 1.28% and 1.30%, reaching 31.69% and 32.08%, respectively. “We expect system liquidity to remain in deficit by the end of the week,” analysts at AIICO Capital Limited added.
Yesterday, the Nigerian interbank borrowing rate (NIBOR) experienced a decline across all maturities, signaling increased liquidity within the banking system. In a note, Cowry Asset Limited said Nigerian interbank Treasury bills true yield experienced mixed movement across most maturities, while the average secondary market yield on T-bills moderated by 0.04%, settling at 24.06%.
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