Money Market Rates Mixed, Banks SDF Bets Rise to N8.2trn

Money Market Rates Mixed, Banks SDF Bets Rise to N8.2trn

Money market rates diverged amidst strong liquidity in the financial system, driven by deposits from Nigerian lenders’ activities at the Apex Bank window.

Banks’ placements at the Central Bank of Nigeria (CBN) Standing Deposit Facility (SDF) increased to ₦8.2 trillion, amid tight lending conditions within the real sector of the economy.

In search of alternative income sources, Nigerian lenders continued to favour money market placements, notably increasing their investments in the SDF following last week’s Treasury bill sales.

The financial system began the new week with over ₦8.2 trillion in excess funds, helping to stabilise short-term benchmark interest rates.

Throughout last week, system liquidity was robust, closing at approximately ₦8.2 trillion, up from ₦6.6 trillion the previous week.  However, liquidity decreased at the start of the week after the settlement of the Treasury bill auction.

Specifically, system liquidity moderated by 1.11% to ₦8.15 trillion on Monday, down from ₦8.24 trillion, largely due to ₦691.86 billion in primary market sales recorded on Wednesday, Meristem Securities Limited said in a note.

The liquidity position was also impacted by a lower opening balance of ₦85.04 billion. Banks increased placement at the SDF by 1.41%, Meristem reported.

Market analysts expect that the ₦2.4 trillion in OMO sales debits will reduce substantial liquidity in the financial system this week, amid an anticipated operation by the Apex Bank.

Market data from the FMDQ platform indicated that the overnight lending rate (OVN) rose by 6 basis points to 22.27% on Monday, while the open repo rate (OPR) remained steady at 22.00%.

CBN Sells OMO Bills Worth N2.4trn, Prices Mid-Tenor 21.9%