Money Market Rates Rise in Absence of Liquidity Pressure
In the absence of liquidity pressure, interbank rates were still adjusted upward in response to the Central Bank of Nigeria’s (CBN) monetary policy tightening.
The rate hike has altered the money market instrument pricing, and this is expected to reflect on the borrowing rate at the CBN standing lending facility (SLF).
Today, the money market rates inched higher, according to analysts. This happened despite a sizeable liquidity balance in the financial system. Meanwhile, the Nigerian interbank offered (NIBOR) rates declined across all tenors, reflecting system liquidity, Cowry Asset Limited stated in a note.
But, the open repo rate and overnight lending rate increased due to adjustments in the money market environment. According to analysts, the opening system liquidity improved further as more credits entered the system.
FAAC inflows lifted the balance in the financial system, and there were inflows from matured OMO bills, including bond coupon payments.
Data from the FMDQ securities exchange platform revealed that the open repo rate (OPR) and the overnight lending rate (O/N) increased by 18 bps and 8 bps to 20.33% and 20.88%, respectively.
Weighing the impacts of rates adjusted made by the CBN, investment banking analysts at AIICO Capital Limited anticipate that interbank rates will increase in response to the recent MPC decision.
The decisions from the two-day Monetary Policy Committee (MPC) meeting in September 2024 saw the Central Bank hike the benchmark lending rate by another 50 bps to 27.25%.
The committee deemed inflation still elevated despite the recent deceleration.
Other notable actions included increasing the Cash Reserve Ratio (CRR) for commercial banks to 50.00% (from 45.00%) and raising the CRR for other financial institutions to 16.00% (from 14.00%). #Money Market Rates Rise in Absence of Liquidity Pressure: Naira Rises against US Dollar Ahead of Sept. FX Auction
