Overnight Rate Drops on Excess Liquidity in Banking System
Overnight lending rate declined slightly as the banking system remained liquid despite debit for Nigerian Treasury bills auction settlement on Thursday.,
System liquidity remained relatively buoyant, closing today’s session at a net long position of ₦2.47 trillion compared to ₦2.25 trillion recorded the previous day.
The surge occurred following inflow from Nigerian Treasury bills that expired, to the tune of ₦668.87 billion. Consequently, funding rates, the overnight rate (O/N), and open repo rate (OPR) remained firm at 22.50% and 22.80%, respectively.
The banking system opened the day with a liquidity surplus of ₦2.47 trillion, representing an improvement of ₦221.46 billion from the previous session’s surplus level.
The liquidity surge occurred due to inflows from expired Treasury bills totalling N668.87 billion, which offset other related money market outflows.
Also, Deposit Money Banks’ (DMBs) placements at the Central Bank of Nigeria’s (CBN) Standing Deposit Facility (SDF) window enhanced system liquidity.,
Investment firms reported that SDF lodgment rose to ₦2.65 trillion, despite a net liquidity outflow of ₦283.74 billion from the 5-Feb-2026 Nigerian Treasury bills that matured and the settlement of the midweek auction.
Consequently, average funding cost edges lower by 2bps to 22.65%, as the Open Repo Rate (OPR) remains steady at 22.50%, while the Overnight Rate (OVN) slides by 3bps to 22.80%.
Barring any funding activities, we expect the average funding rate to moderate amid improved system liquidity, AIICO Capital Limited said in its latest update.
Meanwhile, the Treasury bills secondary market closed bullish as the average benchmark yield declined by -65bps to close at 17.67%. Fixed income market analysts at Anchoria Securities Limited attribute this to unmet demand at the latest PMA filtering in.
Proceedings in the secondary market for OMO was also bullish as average benchmark yield declined by -1bp to close at 21.33%. #Overnight Rate Drops on Excess Liquidity in Banking System UBA Target Price Sets at N62, 40% Upside Potential Projected
