Overnight Lending Rate Drops on Excess Market Liquidity
Overnight lending rate (OVN) declined slightly as deposit money banks (DMBs) placements drove the financial system liquidity upward on Monday.
Against expectation, the Central Bank of Nigeria (CBN) failed to conduct an open market operation despite excess liquidity conditions in the money market.
Market liquidity opened the day in a credit balance of ₦4.32 trillion, representing an increase of ₦27.89 billion from Friday’s closing level, according to investment banking analysts.
Banks’ placement was the major contributor to the expanded liquidity, with N4.09 trillion lodgment raising the balance in the standing deposit facility to N4.35 trillion.
Money market analysts said this dragged the short-term benchmark interest rate lower slightly.
The open buy back held steady at 22%, and the overnight lending rate declined a basis point to 22.09%, according to FMDQ money market data update obtained on Monday.
The market anticipates interbank funding rates to remain range-bound in the near term, supported by current system liquidity levels.
MarketForces Africa reported that the financial system liquidity expanded by N1.10 trillion to N4.08 trillion last week, as inflows from OMO maturities and SDF repayments offset liquidity absorption through OMO issuances.
Consequently, money market conditions remained broadly stable, with the Open Repo Rate (OPR) unchanged at 22.00%, while the Overnight Rate moderated marginally by 4bps week on week to 22.10% Nigerian Treasury Bills Yields Fall on Naira Asset Attractiveness
