Money Market Rates Diverge as Banks Place N5.7trn in SDF
Money market rates headed in a different direction as the Central Bank of Nigeria (CBN) moved to mop up excess liquidity in the financial system on Thursday.
The CBN conducted an open market operation where OMO bills worth N600 billion were offered to foreign portfolio investors and deposit money banks (DMBs).
Excess liquidity in the financial system had surged near N5 trillion the preceding day in the absence of the Apex Bank primary market actions.
The funding level continues to fuel commercial banks’ decision to park their respective free cash with the CBN at the standing deposit facility rate of 24.5%. Smaller banks that have been accessing funds from the standing lending facility recorded a slowdown as pressures eased.
According to data from the FMDQ platform, the open repo and overnight lending rates diverge as deposit money banks (DMBs) continue to park funds into the Standing Deposit Facility (SDF).
The market liquidity reached a surplus balance of ₦5.9 trillion, reflecting a significant increase of ₦1.1 trillion from the previous level.
Investment firm AIICO Capital Limited revealed that the improvement was mainly driven by an increase in the SDF window to ₦5.7 trillion and a ₦1271.1 million coupon inflow.
Despite the huge liquidity level, the average funding costs rose slightly by four basis points, the investment firm said. Interbank rates movement was driven by enhanced system liquidity despite ₦600 billion OMO auction conducted today.
Medium-term rates compressed, with 1-month, 3-month, and 6-month tenors declining 18bps, 27bps, and 35bps respectively, investment firm Cowry Asset Limited stated.
Money market funding costs showed mixed movements as the Open Purchase Rate rose 7bps to 24.57%, while the overnight lending rate remained unchanged.
The market anticipates funding cost to remain at similar level, barring any funding activity
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