Money Market Rates Rise as FX Swap, CRR Drag Liquidity
Money market rates Increased due to liquidity pressure relating to outflow for FX auction, swap and cash reserves ratio debits on banks deposits. Deposit Money Banks increase borrowing from the Central Bank of Nigeria (CBN) window to meet short term funding requirements.
Afrinvest Capital Limited reported in an update that local lenders raised N930.7 billion from the standing lending facility. Analysts noted that in the just concluded week, costs of interbank fund increased amidst OMO, Treasury Bills repayments.
Interbank rates have remained at double digits high after the central bank adjusted benchmark interest rates upward by 50 basis points to 27.25% in Sept.
The moving market dynamics has caused rates adjustments in the financial markets while the authority’s auction sales keep liquidity balance tight.
Analysts said the liquidity level in the financial system ended in a deficit side eon Friday due to bucket of outflows.
The market was debited with naira equivalent for the Central Bank of Nigeria’s (CBN) foreign currency (FX) auction sales to authorised dealers banks worth $50 million.
At the same time, the CBN debited banks on additional deposits as part of loan to deposit ratio maintenance. The financial market also experienced outflow relating to settlement of N500 billion OMO auction bets by the market participants.
Specifically, analysts said CBN’s CRR activities exacerbated the illiquidity, resulting in a significant rise in interbank rates. The open repo rate increased by 33 basis points to settled at 32.36% on Friday, data from the FMDQ platform confirmed.
Also, the overnight lending rate rose by 60 basis points to settle at 33%. The huge OMO auction debit, FX swap outflow dwarfed net inflows from OMO maturities worth N54.45 billion, thus further pressuring system liquidity.
Thus, the average liquidity closed at a net short position of N651.32 billion, according to Cordros Capital Limited as against net short position of N174.26 billion in the prior week. # Money Market Rates Climbs as FX Swap, CRR Drag Liquidity
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