Money Market Rates Mixed as OMO Debit Drains Liquidity by 38%
The Nigerian money market rates closed mixed on Wednesday as financial system liquidity declined by 38% on the day due to the settlement of the OMO bills auction.
This followed aggressive liquidity management activities of the Apex Bank, with huge OMO bills sales to banks and foreign portfolio investors earlier this week.
Hence, the financial system liquidity balance declined by 38.0% to ₦4.04 trillion from ₦6.52 trillion, AIICO Capital Limited said in a report shared with investors.
Market analysts attributed the reduced money market liquidity profile to an OMO auction settlement outflow and a ₦640.64 billion reduction in Standing Deposit Facility (SDF) placements.
The market recorded ₦2.48 trillion in total outflow, reflecting the net effect of the ₦3.47 trillion OMO auction settlement and ₦211.62 billion in coupon payments, Herwood Capital Limited said in a note.
Despite the lower liquidity, the Overnight Rate (OVN) eased by 6bps to 22.13%, while NOFR and OPR remained unchanged at 22.00%, indicating adequate liquidity among lending banks.
Nigerian Interbank Offered Rates closed mixed on Wednesday. Driven by subdued system liquidity, the overnight rate climbed 9bps to 22.30%, Cowry Asset Limited said in a note.
The short-term funding costs diverged as the Overnight rate fell 6bps to 22.13%, with the Open Repo rate remaining unchanged at 22.00%.
Softer investor demand drove the average Nigerian Treasury Bills yield up by 2bps to 18.01%, highlighting a bearish tilt in the fixed-income space.
Supported by current liquidity levels, funding rates are expected to hover around prevailing levels despite the T-bills settlement, barring any major liquidity intervention by the CBN, such as a potential OMO auction. Treasury Bills Yields Fall on Investor Demand for Naira Assets
