Money Market Rates Drop Despite Huge OMO Bills Outflow
Money market rates dropped as liquidity levels in the financial system closed strong despite huge outflows for OMO bills sold to deposit money banks and foreign portfolio investors at the Central Bank primary market on Friday.
Meanwhile, the robust liquidity level experienced in the money market was driven by inflows from CBN FX swaps, FAAC disbursements of about N300 billion, Remita receipts, and FGN bond coupon payments worth N229.39 billion in addition to exiting balance.
Market analysts said some Nigerian banks deposited funds worth more than N5 trillion into the central bank standing deposit facility in the absence of significant funding pressures in the system.
These inflows outweighed FX settlement and cash reserve ratio (CRR) outflows in the money market, keeping the average liquidity balance at N1.18 trillion net long position ahead of fresh inflows in the new week.
Interbank liquidity opened at N368.21 billion and improved by N1.418 trillion to close at N1.785 trillion, AIICO Capital Limited said in a note.
Market analysts reported that money market rates stayed anchored around 26.5% despite a N714.38 billion Nigerian Treasury bills settlement and a N1.008 trillion OMO auction debit on Friday.
The Overnight Policy Rate (OPR) and Overnight (O/N) rate closed at 26.50% and 26.88%, respectively, down 5.10% and 5.17% week on week in the absence of significant funding pressures.
Analysts at AIICO Capital Limited expect system liquidity to stay ample, with N259.69 billion bond coupon inflows offsetting auction settlements, likely keeping rates anchored near current levels barring new funding shocks.
The banking system witnessed inflows from FGN bond coupon disbursements and contractor payments last week. Meanwhile, some analysts anticipate the lower liquidity levels to prompt a slight uptick in the short-term benchmark interest rates. BUA Cement Bolsters Earnings; Profit Rises by 351% in Q1
