Money Market Rates Soar as Banking Deficit Expands
Money market rates remained elevated, reflecting tight liquidity condition in the financial system. The short-term interest rates benchmark advanced sharply over active demand for funds by local banks.
The surge in banking deficit kept rate above 32% in the absence of significant inflows. Funding pressure started with Nigerian Treasury bills auction settlement, and earlier last week, the Central Bank sterilised huge amount relating to its pending cash reserves activity.
Pattern revealed that the short term benchmark interest rates remained elevated for most part of the week despite inflows from FGN coupon payment.
The financial system closed the week with a negative balance of ₦956.03 billion from about N856 billion banking system deficit on Thursday.
The money market opened the just concluded week with about N99 billion deficit until it expanded strongly. The average daily liquidity stood at a deficit of ₦477.96 billion, according to TrustBanc Financial Group Limited.
The firm said this shift was primarily driven by the net impact of Nigerian Treasury bills issuances worth ₦387.83 billion, reversing the previous week’s surplus of ₦420.92 billion.
Interbank liquidity remained in negative territory throughout the week, driven by CRR debits and subsequent liquidity constraints. Despite inflows for oil-producing states, market illiquidity persisted, keeping interbank rates elevated.
The repo rate (OPR) and overnight lending rate steadily increased, reaching 32.33% and 32.75%, respectively, as liquidity worsened midweek.
The market saw further strain following a net Nigerian Treasury bills settlement of ₦516.59 billion. By the week’s close, illiquidity persisted, maintaining elevated interbank rates.
The repo rate rose by 5.32% week on week to 32.40%. Also, the overnight lending rate increased by 5.13% to 32.80% in the absence of significant inflows.
At the close of the week, The Nigerian Interbank Offered Rate rose across most tenors, except for the overnight NIBOR, which declined by 0.10% to 32.83%. Analysts expect liquidity to tighten further in the new week due to Nigerian Treasury Bills auction settlements and other bank obligations.
Market analysts expect liquidity pressures to intensify as outflows from T-bills auction worth ₦800 billion to outstrip FGN bond coupon payments of about ₦300billion. #Money Market Rates Soar as Banking Deficit Expands#
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