Money Market Rates Mixed, Liquidity Closed Strong Despite Outflows
In the money market, the absence of significant funding pressures kept the short-term benchmark interest rates movements in check as liquidity balance remained sufficient even with record outflows.
Banks’ borrowing eased while some cash-rich lenders continued to deposit unneeded funds with the Central Bank of Nigeria. Generally, the rate on free funds remained at the floor, tracking below the monetary policy benchmark rate to discourage banks from parking funds in the CBN window.
Despite outflows, the liquidity balance in the financial system closed positive ahead of the flood of inflows that are expected to enhance the money market positions.
The Nigerian Interbank Offered Rate (NIBOR) declined across most tenors, except for the overnight rate, which edged up by 0.09% to 26.84%, according to Cowry Asset Management Limited.
The interbank market remained liquid throughout last week, starting with a N1.30 trillion credit balance and closing at N684.79 billion, AIICO Capital Limited said in a note. This happened despite significant outflows from the N756.74 billion OMO auction, N310.35 billion net NTB settlement, and CBN FX-related debits.
Investment banking firms reported that liquidity condition was partly supported by N239.15 billion in OMO maturities. The CBN maintained tight monetary policy, conducting a heavily subscribed N500 billion OMO auction, which dragged funding lower.
Despite the liquidity drain, funding rates held firm at the 26.5% level, as the Overnight Policy Rate (OPR) remained stable at 26.50%, while the Overnight Rate (O/N) rose modestly by 12 bps week on week to close at 26.95%.
With N175 billion in FGN bond coupons and FAAC inflows due in the new week, analysts said interbank conditions should stay liquid, likely maintaining rates at the prevailing 26.5% levels.
Accordingly, the average system liquidity, though still healthy, settled at a lower net long position of N915.26 billion as against a net long position of N1.36 trillion in the previous week, Cordros Capital Limited said in a report. #Money Market Rates Diverge, Liquidity Stays Strong Despite Outflows Lagos, BoI to Sign MoU to Improve SMEs Access to Finance
