Overnight Rate Dips as T-Bill Inflow Boosts Market Liquidity
Driven by a slide in the overnight lending rate, funding costs in the money market eased slightly as the financial system recorded an inflow from matured Nigerian Treasury bills (NTBs).
In the absence of a midweek primary market auction and open market operations, excess liquidity in the financial system has been relatively strong, averaging near N5 trillion this week.
The Apex Bank has been less aggressive in liquidity mop-up efforts by allowing inflows from expired OMO and Treasury bills to enter the money market directly.
In the absence of OMO and Treasury bill auctions, intermarket system liquidity remained in surplus at ₦3.96 trillion, supported by inflows of about ₦429.23 billion from the 20-Aug NTB maturity.
Actively seeking returns on free funds, Deposit Money Banks (DMBs) maintained strong participation at the Central Bank of Nigeria’s (CBN) Standing Deposit Facility on Thursday.
Banks’ placement at the SDF window, totalling ₦3.37 trillion, kept lenders from borrowing at the Standing Lending Facility (SLF) at a much higher rate.
Market analysts explained that non-recourse to the SLF window signals the absence of funding pressures, particularly among tier-2 lenders.
Nigerian Interbank Offered Rates (NIBOR) logged mixed performance on Thursday, as the overnight rate slipped 3 bps to 22.18%, reflecting improved system liquidity, Cowry Asset Limited said.
Money market funding rates showed mild divergence, with the overnight lending rate easing 11bps to 22.25% while the Open Repo rate remained unchanged at 22.00%
Analysts at AIICO Capital Limited anticipate coupon inflows of N508.81 billion from the 18.50% FGN FEB 2031 and 19.00% FGN FEB 2034 bonds, which will support market liquidity on Friday.
