Money Market Rates Soften Despite OMO, NTB Debits
Money market rates softened despite huge outflows related to settlement for OMO and the Nigerian Treasury bills auction floated by the monetary authority last week.
The financial system opened with strong liquidity, driven by inflows from expired bills. This buoyed system liquidity to N4.68 trillion, largely supported by strong placements at the Standing Deposit Facility.
Banks continue to place excess funds with the Central Bank to augment their revenue as lending appetite tightens. Commercial banks’ preference for investment securities intensifies, with fair values on financial statements running into the trillions.
Liquidity conditions tightened sharply midweek following aggressive sterilisation through OMO auctions, underscoring the authorities’ resolve to rein in excess liquidity. Intermarket liquidity profile was largely supported by DMBs’ lodgments with the Apex Bank totalling ₦2.08 trillion
By the close of the week, system liquidity had moderated to N2.16 trillion, reflecting growing pressure compared with N4.32 trillion in the prior week.
Liquidity conditions were further shaped by expectations of additional debits, particularly the N1.91 trillion raised at the NTB auction, set against N765.9 billion in NTB maturities and N550 billion in OMO maturities.
This net effect signalled a deliberate tightening bias by the Central Bank of Nigeria, aimed at sustaining firm funding conditions. Interestingly, despite the tighter liquidity backdrop, money market rates softened.
The overnight rate declined by 7bps week-on-week to 22.71%, while the funding rate remained flat at 22.50%. NIBOR rates also trended lower across the curve, reflecting mixed market activity and intermittent inflows, investment firm Cowry Asset Limited said. Treasury Bills Yield Falls as Investors Refill Lost Auction Bids
