Money Market Rates Dip as Liquidity Stress Eased
The short-term benchmark interest rates in the money market declined in the just concluded week in the absence of significant pressure on liquidity levels in the financial system.
According to data from FMDQ, the repo rate declined by 14 basis points to 31.61% on Friday, while the overnight lending rate dipped by 15 basis points to 32.45%. The movement in rates affects interbank borrowings, and mutual fund returns.
The Nigerian interbank offered rate declined across the board as banks with liquidity sought lower rates on Friday, said Cowry Asset Limited. MarketForces Africa reported that local lenders turned to net borrowers from the Central Bank of Nigeria’s (CBN) standing lending facility due to strain on system liquidity.
However, the market recorded an inflows from maturity instruments, causing funding rates to decline slightly. Last week, there were N32.20 billion inflows from OMO maturities. Deposit money banks’ activity at the CBN standing lending facility window cushioned the effects of debits for net Nigerian Treasury bills issuance worth N44.16 billion, Cordros Capital Limited said in a note.
The investment firm stated that the average liquidity closed at a net long position of N1.44 trillion versus a net long position of N1.13 trillion in the prior week. Barring any significant outflows in the new week, analysts anticipate the N16 billion inflows from OMO maturities and another 65.36 billion FGN bond coupon payments will likely support system liquidity.
System liquidity balance has been deficit despite a slight improvement from the previous week. Consequently, the Open Repo Rate and the Overnight Rate declined by 45bps and 8bps to 31.61% and 32.45% week-on-week.
AIICO Capital revealed expectations that the interbank rates would stay elevated this week, given that the bond coupon inflows on July 2034 paper is only ₦65.00 billion. With the expectation that funding levels will improve, analysts at Cordros Capital Limited forecast that the overnight lending rate will dip further. Money Market Rates Dip as Liquidity Stress Eased Nigeria, Angola Inflation Highest in Frontier Markets -Report
