Money Market Rates Mixed as Banking System Deficit Reduces
Money market rates diverged as deficit liquidity balance in the financial system improved on Thursday. The short-term benchmark interest rates remained at double-digit level as analysts predict banks would start to borrow to meet funding requirements.
Though, banking system liquidity stayed negative on the day, there was slight improvement when compared with the balance reported midweek.
Deficit in the financial system reduced to N938 billion on Thursday due to inflows from matured borrowing instruments from about N2.306 trillion on Wednesday.
The settlement for the Central Bank of Nigeria (CBN) OMO auction conducted on Tuesday drained liquidity levels in the market. Due to the tight market liquidity, funding rates across banks climbed further, albeit at a slow pace when compared with the rate of movement in the previous day.
The Nigerian Interbank Offered Rate (NIBOR) declined across most maturities, signaling there was an improvement in the liquidity level within the banking system.
Data from the FMDQ platform confirmed that the repo rate (OPR) increased by 13 bps to 32.03%, reflecting the liquidity strain. However, the overnight lending rate (O/N) remained unchanged at 32.53% due to low activities among local lenders.
“We expect interbank rates to stay elevated, given that the liquidity situation is likely to remain unchanged,” AIICO Capital Limited said in a note.
In its note, TrustBanc Capital Limited affirmed the deficit in the banking system improved by 59%, opening the day with a shortfall of N938.10 billion.
Barring any significant inflow, the system is likely to end the week in a deficit position, keeping interbank rates elevated, the investment firm told investors. #Money Market Rates Mixed as Banking System Deficit Reduces#
