Money Market Rates Decline as FAAC Inflows Boost Liquidity

Money Market Rates Decline as FAAC Inflows Boost Liquidity

Money market rates, the overnight lending and open repo rates dropped further after inflows from the Federal Accounts Allocation Committee hit the financial system

Hence, the liquidity balance in the financial system experienced a significant improvement, increasing by ₦1,021.27 billion, shifting from a debit position of ₦837.29 billion to a credit of ₦183.98 billion, AIICO Capital Limited told investors in a report.

The investment firm stated that the positive change was primarily driven by FAAC disbursements totaling ₦874 billion. The liquidity balance in the financial system was also boosted by net cash reserve ratio maintenance credit totaling N154 billion, according to Cordros Capital Limited.

However, debits from the FGN bond auction, FX market interventions by the CBN, and CRR debits caused interest rates to exceed 32% during the week, analysts at AIICO Capital Limited added.

Analysts noted that FGN bonds debit worth N289.60 billion was recorded last week, thus reduced the amount available in the financial system.

But the funding level increased further on the back of signature bonuses and cash reserves credit inflows, lowering the money market rates towards the end of the week.

Data from the FMDQ platform confirmed that the Overnight Policy Rate decreased by 2.55% to 29.78% in the absence of significant funding pressure. Likewise, the Overnight Rate fell by 2.42% to 30.14% week-on-week.

“We anticipate that rates will moderate due to increased liquidity from expected inflows from FGN Bond coupons and OMO maturities unless significant outflows occur due to CRR debits, OMO auctions, and/or FX interventions”, AIICO Capital Limited said in its update..

Barring any liquidity management measures by the CBN, analysts at Cordros Capital Limited said they expect the inflows from OMO maturities totaling N379.20 billion and FGN bond coupon inflows worth N238.90 billion to further boost system liquidity in the new week.

The Nigerian interbank borrowing rate (NIBOR) fell by 3.81%, settling at 28.13%. indicating increased liquidity in the banking system, Cowry Asset Limited said. #Money Market Rates Decline as FAAC Inflows Boost Liquidity

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