Money Market Rates Dip as Remita, Coupon Inflows Boost Liquidity
Money market rates slide, albeit, marginally, due to relative improvement in the financial system liquidity. The interbank rates remained elevated though liquidity levels in the financial system improved after series of inflows were reported last week.
The liquidity crunch in the financial market continued despite coupon inflows, significant Remita inflows, and other large inflows aimed at offsetting foreign exchange settlements and Remita outflows, according to AIICO Capital Limited.
Analysts at Cowry Asset Limited told investors in a note that Nigerian interbank offered rate (NIBOR) fell across all maturities signaling improved liquidity in the banking system. Banks have been borrowing from the Apex Bank to fund operations. Cash rich lenders also have been asking for higher rates to deliver on interbank demands.
Overall, the interbank rates declined week-on-week. Specifically, the Overnight Policy Rate (OPR) fell by 3 bps to 32.33%, while the Overnight Rate (OVN) decreased by 44 bps to 32.56%, data from the FMDQ platform confirmed.
“We expect interbank rates to trade in a mixed range due to next week’s FGN bond auction and the upcoming FAAC credits”, AIICO Capital Limited told investors in a note.
There was N28.22 billion inflows from FGN bond coupon payments. Expectedly, the inflows were insufficient to provide support system liquidity, causing the OVN rate to remain elevated.
Analysts noted that average liquidity position declined, closing at a net short position of N1.51 trillion from a net short position of N643.66 billion in the previous week.
The liquidity balance in the financial markets was driven by inflows from daily average standing lending facility injection of N1.5 trillion.
Afrinvest Limited said this offset the daily average outflow of N47.6 billion through the Central Bank of Nigeria’s standing deposit facility (SDF) window.
The market expects rate to slow further due to expectation that N873.13 billion FAAC credits will increase liquidity balance in the new week.
The sum is expected to offset debits for the FGN bond primary market auction. In the new week, the Debt Management Office is expected to conduct monthly bond auction where the authority plan to sell N200 billion worth of FGN papers to investors. #Money Market Rates Dip as Remita, Coupon Inflows Boost Liquidity
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