Money Market Rates Jump as CRR Debit Squeezes System Liquidity

Money Market Rates Jump as CRR Debit Squeezes System Liquidity

Money market rates surge further as outflows for pending cash reserve ratio strained liquidity balance in the financial system.  The outflow relating to the Central Bank of Nigeria’s (CBN) CRR activity increased the financial system deficit.

The banking deficit surged further on Tuesday from N98.65 billion at the beginning of the week amidst inflows from oil-producing states.  The Nigerian Interbank Offered Rate (NIBOR) showed mixed movements across all tenors, according to Cowry Asset Limited.

The firm stated that the overnight NIBOR and 1-month tenor increased by 0.26% and 0.06% to 32.58% and 27.12%, respectively.  Key money market indicators trended upward, analysts said, noting that the Open Repo Rate (OPR) rose by 0.35% to 32.25%.

Also, the overnight lending rate increased by 0.17% to 32.67% on Tuesday in the absence of stronger inflows from maturing instruments. Despite inflows for oil-producing states, market illiquidity persisted, keeping rates elevated.

The interbank market faced persistent liquidity challenges throughout February, driven by significant outflows from OMO and FGN bond settlements. The month began with a liquidity shortfall following a ₦1 trillion OMO auction and CRR deductions, pushing the repo and overnight lending rates above 32%

Market analysts said the rate uptrend would persist after inflows from oil-producing states failed to offset market illiquidity, deepened by the settlement of pending CRR debits. #Money Market Rates Jump as CRR Debit Squeezes System Liquidity CBN Opens FX Window for BDC to Stock up at NFEM Rate