Money Market Rates Diverge as System Liquidity Fluctuate

Money Market Rates Diverge as System Liquidity Fluctuate

Money market rates diverged as liquidity levels in the financial system fluctuated and closed at long net positions amidst banks’ activities at the Central Bank window.

The market recorded no primary market auction, though there were inflows from matured OMO bills, while activities at the borrowing window reduced sharply.

Liquidity in the banking system saw significant fluctuations, starting the week tightened, improving during the week, and closing higher than it began the week.

System liquidity opened the week with a balance of N1.47 trillion, supported by primary market inflows despite lower Standard Deposit Facility (SDF) placements, AIICO Capital Limited reported.

During the week, the surplus balance improved to N2.21 trillion, driven by N810.10 billion inflow from 13- Jan-26 OMO maturity, despite an offset of N101.50 billion borrowing at the CBN’s Standard Lending Facility (SLF).

By mid-week, the market saw a slight moderation in the liquidity to N2.07 trillion despite an increase in placements at the Standing Deposit Facility (SDF) from N1.40 trillion to N1.99 trillion.

However, average funding rates increased marginally by 1bp to 22.61%. On Thursday, liquidity rebounded slightly to N2.13 trillion following sustained DMB placements, partly offset by N341.64 billion primary market inflow.

On Friday, liquidity moderated slightly to N2.11 trillion. DMBs’ placements at the CBN SDF window increased to N1.94 trillion, and there was a N535.41 million inflow from repayment.

As such, market liquidity improved week-on-week by N686.04 billion as the average funding cost eased slightly by 1 bp week-on-week to 22.60%, with the Open Repo Rate (OPR) steady at 22.50%, while the Overnight Rate fell by 2 bps to 22.69%.

The NTB secondary market closed on a bearish note, with the average benchmark yield expanding by +15 bps week on week to close at 18.32%, as investors reposition ahead of next week’s sizable auction, where the DMO is expected to offer over N1.15 trillion in maturities.

Proceedings in the secondary OMO market were similar, as the average benchmark yield expanded by +116 bps to close at 22.26%, driven by significant sell pressures at the short and belly of the curve.

With expected inflows of N725.19 billion from the 22-Jan-26 NTB maturity and N1.30 trillion from the 20-Jan-26 OMO maturity next week, system liquidity is expected to remain relatively buoyant despite projected outflows midweek auction.  Moniepoint Opens Applications for Second Dreamdevs Initiative