Overnight Lending Rate Rises as Banks’ Lodgements Increase
The overnight lending rate rose, but the repo rate was steadied in the money market amidst excess liquidity level in the banking system. The absence of significant funding pressure kept money market rates movement in check.
The market witnessed increased activities at the Central Bank of Nigeria (CBN) Standing Deposit Facility (SDF) window, with local banks surging lodgements at the 22.50% SDF rate.
There was also additional inflow from primary market repayment ahead of the midweek auction on Wednesday, where the CBN will offer N1.15 trillion of treasury bills for subscription.
System liquidity opened on a stronger footing, with a surplus balance of N2.24 trillion in the banking system on Monday. This represents an improvement from the previous trading day’s opening level of N2.11 trillion.
The funding profile expansion was supported largely by N125.72 billion in additional placements at the CBN SDF window, which raised the total amount lodged to N2.07 trillion. The market also recorded additional inflows from primary market repayments worth N66.50 billion.
However, average funding cost rose 1bp to 22.61% as the Open Repo Rate (OPR) remained flat at 22.50% while the Overnight Rate (OVN) spiked by 2bps to settle at 22.71%.
Amid an expected inflow of N1.31 trillion from 20-Jan-26 OMO maturities, analysts at AIICO Capital expect funding costs to ease slightly, barring any funding activities.
At the close of business Nigerian Interbank Offered Rates (NIBOR) fell across all tenors, with the overnight rate dropping 4bps to 22.78%. This decline stemmed from enhanced system liquidity, driven by a rise in net SDF placements.
The secondary market for Treasury bills was active and traded bullishly as the average yield declined by -5 bps to close at 18.28%, driven by demand on the long-dated 353-day-to-maturity (-25 bps) bill.
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