Money Market Rates Tighten as OMO, T-Bills Debits Drag Liquidity
Money market rates tightened amid a surplus of liquidity in the financial system, despite a significant outflow related to the settlement of auctioned OMOs and Treasury bills.
The Central Bank of Nigeria (CBN) mopped up liquidity at a midweek Treasury bill auction and, the following day, conducted an open market operation, sterilising about N2.5 trillion through the allotment of OMO bills.
The two auctions, which were settled, reduced excess liquidity conditions in the financial system, though the market witnessed an inflow from OMO bill repayment,
The credit balance at the intermarket moderated from an opening surplus of N4.35 trillion to N3.57 trillion at close, following N1.45 trillion in debits from Treasury bill sales.
The market also recorded ₦2.60 trillion in OMO settlements; hence, funding conditions tightened slightly, with the average funding cost rising by 8bps week-on-week to 22.13%.
To meet their short-term funding gap, some banks also borrowed N15.80 billion from the Standing Lending Facility (SLF), according to Cowry Asset Limited.
The investment firm said these outflows were partly offset by approximately N2.48 trillion in OMO maturities, leaving the system with a still-sizeable N3.57 trillion surplus.
The financial system liquidity was broadly comfortable, opening at ₦4.07 trillion and peaking at ₦6.81 trillion, supported by OMO maturities and strong bank placements at the CBN’s SDF window.
Still, the relatively high liquidity buffer did not translate into lower funding costs, as the overnight lending rate (OVN) rose 15 basis points (bps) to 22.25% at the close of trading on Friday.
Meanwhile, the open repo rate (OPR) remained unchanged at 22.00%, pointing to a modest tightening in very short-term funding conditions.
