Money Market Rates Diverge as Liquidity Deficit Widens
Interbank rates mixed in the money market as the liquidity deficit extended further on Tuesday ahead of FAAC inflows expectations. Analysts noted that local deposit money banks are yet to come out of the woods of limited funding access as money market conditions remained tight.
The deficit in the banking system expanded for the fifth consecutive day to open at N438.02 billion negative. On Tuesday, the Central Bank of Nigeria policy committee adjusted the benchmark interest rate by 25 basis points to 27.50% to combat inflation.
The monetary authority, however, keeps other rates unchanged—an asymmetric corridor around the MPR retained at +500bps/-100bps. At the end of the policy committee meeting in September, the CBN had repriced the rate at which local banks borrow from its Standing Lending Facility (SLF) to 31.175%.
Banks have continued to access funds from the facility to fund operations and meet their daily liquidity demand. On Tuesday, the Nigerian Interbank Offered Rate (NIBOR) increased across most maturities, indicating tight liquidity conditions within the banking system.
The short-term benchmark interest rates moved in different directions in the money market in the absence of significant inflows to saturate liquidity levels. Data from the FMDQ revealed that the open repo rate (OPR) decreased by 0.06% to 32.00%, while the overnight lending rate (O/N) rose by 0.15%, closing at 32.71%.
Market analysts maintain a prediction that interbank rates will remain elevated as system liquidity sank deeper into negative territory. #Money Market Rates Diverge as Liquidity Deficit Widens Short-term Benchmark Interest Rates Rise on Tight Liquidity
