Money Market Rates Decline Ahead of FAAC Credit

Money Market Rates Decline Ahead of FAAC Credit

Money market rates decline ahead of expected FAAC credit inflows in the new week. According to data from the FMDQ Securities Exchange, the open repo and overnight lending rates declined due to better liquidity in the financial system in the just concluded.

Liquidity level improved last week after N200 billion inflows from Remita payments, FGN bond coupon payments worth N65.36 billion, and OMO maturities of N16.00 billion hit the system, Cordros Capital Limited said in a note.

The investment firm said subsequently, the week’s average liquidity remained at a net long position, settling at N870.92 billion from N1.44 trillion in the previous week.

Funding rates remain elevated amidst expectation of another interest rate hike at the end of the monetary policy committee meeting of the Central Bank of Nigeria. The last adjustment in benchmark interest lifted money market rates above 30%, and funding rates have continue to hover around the range.

For banks, higher interbank rates affects funding costs. It also have impacts return on money market funds.

The Open Repo Rate (OPR) dipped by 22 basis points week on week to settle at 31.39% in the money market on Friday. Likewise, the overnight lending rate crashed by 43 basis points to 32.02%

The market expects Federal Account Allocation Committee disbursement (FAAC) credits to hit the system in the new week in addition to about ₦215.00 billion in FGN bond coupons.

Analysts said they expect combined inflows from FAAC disbursements N894.60 billion, FGN bond coupon payments worth GN216.59 billion and OMO maturities totaling N44.00 billion to offset the debits for FGN bond auction worth N300 billion and a possible net issuance at the Wednesday Treasury bills auction.  CBN Meeting: Investment Firms See Up to 100bps Interest Rate Hike