Money Market Rates Ease as Financial System Liquidity Climbs

Money Market Rates Ease as Financial System Liquidity Climbs

Money market rates eased as excess liquidity in the banking system increased amidst the Nigerian Treasury bills auction. The authority conducted a primary market auction where N650 billion worth of Treasury bills was floated for investors’ subscription.

At the auction, the CBN placed an offer size of N650 billion on the table, but demand came at N750 billion, significantly lower than past auctions—suggesting weak appetite for the naira assets.

Banks played soft as the SDF rate of 24.5% stayed ahead of the average yield on Nigerian Treasury bills papers. though liquidity concerns have reduced a bit.

In the money market, system liquidity continued to improve further on Wednesday, rising by +23.81% to N2.19 trillion from N1.77 trillion, according to Meristem Securities Limited. 

Analysts said the liquidity surge was largely driven by N534.30 billion increase in the Standing Deposit Facility (SDF). Banks’ money market activities were mixed; some cash-rich lenders were noted to continue taking advantage of 24.5% rate on money parked with the Central Bank of Nigeria.

At the same time, the market saw increased activities at the CBN Standing Lending Facility, where commercial lenders access funds to meet their operation requirements.

Interbank rates displayed mixed performance on Wednesday, with overnight rates declining 4 bps to 24.83% due to enhanced system liquidity.

The market recorded an inflow of ₦6.76 billion in primary market repayments and ₦275 billion in bank borrowings from the CBN this week.

However, medium-term rates increased, with 1-month, 3-month, and 6-month tenors climbing 25 bps, 72 bps, and 119 bps, respectively, according to Cowry Asset Limited.

Money market funding costs eased across the board as the overnight rate fell 49bps to 24.86%, while the Open Purchase Rate dropped 30bps to 24.50%.

The Treasury Bills secondary market showed divergent movements on Wednesday, with 1-month, 6-month, and 12-month yields advancing 15 bps, 16 bps, and 1 bp, respectively, while the 3-month rate declined 20bps.

Despite these varied trends, the average NT-Bills yield inched up approximately 0.5bp to 17.35%, indicating cautious investor sentiment in the secondary market. Naira Steadies at N1463/$ in Absence of FX Liquidity Pressure