Money Market Rates Increase as Liquidity Pressure Persists
The pressure in the money market worsened in the absence of significant inflows from maturing instruments from various borrowing instruments. This kept the financial markets tight on liquidity, and to allocate resources effectively, rates surge above 33%.
The short-term benchmark interest rate which often affect return on mutual fund and other money market accounts are expected to remain elevated.
Investment firms reported that the interbank rates increased further because funding level or liquidity balance in the financial system worsened.
Analysts told MarketForces Africa that the recent tightening has kept the short term benchmark interest rates upward in contrast to previous situation experienced in the latter part of Sept.
Due to weak funding level, transaction at the money market environment were conducted at higher rates while cash rich local banks request higher rates.
According to AIICO Capital Limited, system liquidity opened significantly lower on Thursday while analysts at the firm said most participants relied on the Standing Lending Facility of the Central Bank of Nigeria to fund their operations.
This happed as the apex bank also conducted OMO auction which analysts had projected will put further pressure on funding level.
The funding pressure spurred by OMO auction on Thursday nudged interbank rates closed higher. Specifically, the Open Repo Rate (OPR) and the Overnight Rate (O/N) increased by 4.01% and 3.81% to 32.98% and 33.68%, respectively.
Nigerian interbank offered rate (NIBOR) rose across all maturities, with banks holding reserves aiming to capitalize on higher rates, analysts at Cowry Asset Limited said in a note. #Money Market Rates Increase as Liquidity Pressure Persists CBN Defends Naira with $39m in Forex Market
