NLNG Dividend, Derivation Fund, TBills Inflow Drag Rates Below 27%
Inflows from matured investment securities, Nigeria LNG dividend refund and derivation payment to states kept interbank rates movement in check last week. Banks borrowing reduced in the absence of funding pressures due to an improvement in banking system despite sequence of outflows.
Market revealed that the short term benchmark interest rates were at their lowest when put side by side with past week record. The conditions in the money market was primary driven by NLNG dividend refunds, and 13% derivation funds including inflows from FGN bonds, matured Treasury bills.
Data from the FMDQ securities exchange platform showed that the open repo rate fell by 5.90%, closing the week at 26.50%. Also, the overnight lending rate declined by 5.94% to 26.96% in the absence of funding pressures.
The money market recorded huge inflows from FAAC disbursements totalling about N980.00 billion, in addition to FGN bond coupon payments worth N600.19 billion.
There was also inflows from matured Nigerian Treasury bill which amounted to N649.81 billion, offsetting debits for the FGN bond auction totalling N271.21 billion and net T-bills issuances of N108.73 billion.
Consequently, the average system liquidity improved, settling at a net long position of N29.28 billion as against a net short position of N1.52 trillion in the previous week, Cordros Capital Limited said in an update.
Banks borrow activities at the Standing Lending Facility eased sharply as successive inflows that hit the financial system reduced liquidity pressures earlier experienced.
The week commenced under tight financial conditions, with liquidity constraints driving up interbank funding rates above 30% level. However, on Tuesday, inflows from bond coupon payments, bond maturities, and FAAC allocations provided a relief, narrowing the deficit significantly.
FGN bond auction settlement reversed some of these inflows, briefly pushing liquidity deeper into deficit, TrustBanc Financial Group Limited reported. However, this shortfall was short-lived as fresh inflows from the net impact of NTB issuances bolstered system liquidity.
The improved liquidity conditions resulted in a decline in interbank funding rates with the average daily rate easing to 29.35% from 32.65% recorded the previous week.
Due to improved liquidity conditions in the money market in March, the average daily deficit balance shrank to N387.4 billion from N686.4 billion shortfall recorded in February.
Without disclosing the amount, AIICO Capital Limited reported that additional inflows from the NLNG dividend refund and 13% derivation funds kept liquidity stable.
In the new week, the market expects N652.4 billion inflows from OMO maturity to boost liquidity, likely stabilizing rates barring significant funding pressures. #NLNG Dividend, Derivation Fund, TBills Inflow Drag Rates Below 27% Oando Edges Higher Slightly after Refinery Win
