Overnight Rate Climbs as Financial System Liquidity Declines
Overnight lending rate climbed as financial system liquidity declined in the absence of significant primary market inflows and a slowdown in banks’ activities at the standing deposit facility.
Excess liquidity in the money market was squeezed by the Apex Bank OMO auction floated last week, which attracted approximately N4 trillion from deposit money banks and offshore investors. With a large allotment, liquidity levels fell sharply, prompting a short-term interest rate adjustment in the market.
Nigerian Interbank Offered Rates rose across all tenors on Monday, with the overnight rate edging up by 14 bps to 22.21%, reflecting tighter liquidity levels in the financial system.
The money market liquidity declined further after aggressive mop-up via open market operations conducted by the Central Bank of Nigeria (CBN) last week.
The monetary authority sterilised about N4 trillion in the money market, pushing up the short-term benchmark interest rate. Market analysts at Futureview Financial Limited reported that the financial system liquidity fell to ₦3.05 trillion on Monday from ₦4.63 trillion
In its note, Cowry Asset Management Limited said NIBOR for the 1-month, 3-month, and 6-month tenors, however, moved in the opposite direction, retreating by 56bps, 84bps, and 119bps, respectively.
Funding costs were divergent, as the Overnight rate climbed 9 bps to 22.23%, while the Open Repo rate remained unchanged at 22.00%.
The average yield ON Nigerian Treasury bills closed flat at 17.74%, reflecting measured investor demand and a broadly cautious tone across the fixed-income space. Money Market Rates Mixed as Banking System Liquidity Dips
