Money Market Rates Mixed as Excess Liquidity Hits N6trn

Money Market Rates Mixed as Excess Liquidity Hits N6trn

Money market rates diverged as excess liquidity levels in the financial system hit N6 trillion, reflecting the absence of funding pressures. The short-term benchmark interest rates have been kept behind the average of 25% in the past week to reflect current liquidity conditions.

November has been one of the most liquid, as the Central Bank open market operations slowed down. Even with heavy OMO bills totalling N2.6 trillion sold to investors, liquidity remains strong and robust.

The condition was helped by activities of deposit money banks (DMBs) parking funds at the Standing Deposit Facility.  Banks’ placement maintained uptrend, reflecting commercial lenders’ preference for low-risk interest-earning assets.

Rising default risks continue to affect banks’ appetite to create credit, especially when market participants earned a 24.5% SDF rate of funds.

The system liquidity remained largely stable and robust throughout the week, supported by strong system liquidity and consistent DMB placements at the CBN’s SDF window.

Last week, system liquidity opened the week firm at ₦3.84 trillion. SDF placements averaged ₦4.17 trillion, up 5% from ₦3.96 trillion the prior week, according to TrustBanc Financial Group Limited.

OMO bills repayments totalling ₦3.63 trillion provided a steady boost to system liquidity during the week. Meanwhile, activities at the Standing Lending Facility (SLF) remained muted, recording very minimal funding requests from small lenders.

The week closed with a healthy surplus of ₦6.17 trillion, TrustBanc Financial Group said in a note.

Consequently, average funding costs rose by 7 bps week on week to 24.71%, with the open repo rate held at 24.50% and the overnight rate edging up 13 bps to 24.92% week on week.

In the absence of any liquidity mop-up activities, the market expects funding rates to ease, supported by projected inflows of ₦689.6 billion from NTB maturities, ₦1.4 trillion from OMO maturities, and ₦258.4 billion in bond coupon payments, all of which should provide strong liquidity support to the market. Midwestern Oil & Gas Appoints Elozino Olaniyan First Female CEO