Money Market Rates Decline as Banks’ SDF Placements Surge
The liquidity conditions in the money market improved as deposit money banks (DMBs) lodgments and primary market inflows enhanced the funding profile.
The financial system opened the week tight after huge funds sterilisation by the Apex Bank through series of monetary actions. System liquidity moderated last despite inflows of N2.14 trillion from OMO maturities midweek – eventually ended the trading session in deficit.
Liquidity conditions tapered as the Central Bank of Nigeria (CBN) intensified its sterilisation efforts through a series of OMO auctions, with N5.89 trillion allotted.
The money market record indicated that liquidity in the banking system on Monday was at a surplus balance of ₦596.46 billion, rebounding from the deficit of ₦241.96 billion in the previous session, albeit at a moderate level compared to recent trends.
The improvement was largely driven by ₦1.02 trillion placements at CBN’s Standing Deposit Facility (SDF) window by banks and ₦21.38 billion Primary market inflow.
These inflows are slightly offset by ₦780 billion borrowings through the Standing Lending Facility (SLF) window, according to AIICO Capital Limited.
Consequently, average funding cost dropped significantly by 342bps to 22.80 from the previous 26.22% as the Overnight Rate (OVN) lost 336bps to 22.83, while the Open Repo Rate (OPR) fell by 347bps to settle at 23.00%.
“ We expect funding costs to ease slightly following an expected inflow of ₦1.03 trillion from 3-Feb-2026 OMO maturity, barring any funding activities”, AIICO Capital said in a note.
Last week, money market rates trended higher, with the OVN rate rising to 26.36% from 22.79% and the OPR increasing to 26.07% from 22.50%. In contrast, the call rate edged lower to 6.50% from 6.70%.
Analysts predict that money market rates are likely to remain elevated, particularly if OMO issuances continue to absorb system liquidity. #Money Market Rates Decline as Banks’ SDF Placements Surge NIBOR Spikes as OMO, Bonds Auction Debits Tighten Liquidity
