Money Market Rates Mixed as Liquidity Declines
The short-term benchmark interest rates ended on a mixed note in the money market due to a decline in liquidity levels in the financial system. In the past week, funding rates have been in decline due to the influx of funds from maturing instruments, coupon payments, and the huge Federal Accounts Allocation Committee’s credits.
Opening system liquidity decreased by about 21.37% yesterday, compared to the previous day’s balance. The balance declined despite more than N45 billion inflows from matured OMO bills.
However, the open repo rate (OPR) declined by 5 bps to 25.35%, while the overnight lending rate increased by 10bps to 25.90%. Analysts at AIICO Capital Limited expect interbank rates to hover at similar levels on Wednesday
In July, financial system liquidity was negative for most of the month, especially during the first three weeks. The shortage was caused by cash reserve debits on banks, FX settlements, and other outflows.
Toward the end of the month, analysts said inflows from the monthly FAAC disbursement and bond coupon improved the liquidity balance, resulting in the system ending July with a positive balance of ₦635.58 billion.
This was an increase when compared with ₦514.17 billion recorded at the end of June 2024. Last week, the overnight rate contracted by 60 basis points to 26.1%, driven by the still saturated liquidity in the financial system. Repo rate also declined t0 25%.
Consequently, DMBs sterilised excess cash at the CBN’s Standing Deposit Facility (total: N1.92 trillion), causing the average liquidity for the week to settle at a net short position of N132.33 billion. #Money Market Rates Mixed as Liquidity Declines Bago Settles N25bn Pension Arrears
