OMO Auction Provokes Rates Surge in Money Market
Money market rates increased following the Central Bank of Nigeria’s (CBN) open market operations (OMO) aimed at decreasing the funds accessible in the financial system on Monday.
The market opened with strong liquidity of more than N1.5 trillion ahead of fresh inflows scheduled for the week. This prompted the monetary authority to float N600 billion worth of OMO bills to keep the liquidity level in check in the money market.
The CBN’s intervention aimed to regulate liquidity and money market metrics, resulting in an average rate of 26.5%. The released OMO bills helped stabilise the market liquidity in response to the high inflows expected during the week.
This move, according to analysts, aimed to moderate the liquidity surge and maintain market stability. The action by the Central Bank was a proactive measure to prevent excessive liquidity in the financial system. This initiative was significant in controlling the money market indicators and ensuring a balanced liquidity environment.
Data from the FMDQ platform showed that Open Repo Rate rose marginally by 0.08% to close at 26.58%, while the Overnight Rate climbed by 0.17% to settle at 27.17%, reflecting moderate tightening in short-term liquidity conditions.
Analysts at AIICO Capital Limited said in a note that money market rates should hold around the same levels unless significant funding pressures emerge. The Nigerian Interbank Offered Rate (NIBOR) trended lower across most maturities, with the exception of the Overnight NIBOR, which inched up by 8 basis points.
The Nigerian Treasury Bills (NITTY) curve declined across most maturities, indicating a general drop in yields on short- and medium-term instruments. Despite this broad decline along the curve, average secondary market yields remained bullish, falling by 3 basis points to close at 20.20%. #OMO Auction Provokes Rates Surge in Money Market FG to Construct 250 Units Housing Scheme in Calabar- Minister
