Overnight Rate Rises as Financial System Liquidity Drops
The overnight lending rate rose as liquidity conditions in the financial system tightened after the Central Bank of Nigeria (CBN) midweek Treasury bills auction.
The open buyback was steadied at 22%, a floor level which it has held without shifting. The overnight rate inched higher by 2 basis points to 22.20%, reflecting the liquidity tightening.
The market remains relatively in surplus balance despite an aggressive liquidity sterilisation activity that started with N2.888 trillion in OMO sold by the CBN early in the week.
Market liquidity opened the day at a credit balance of N3.66 trillion, according to Herwood Securities Limited, representing a N0.93 trillion decline from Wednesday’s closing due to Treasury bill settlement.
Money market liquidity had printed at N4.61 trillion midweek, which supported significant bets on Nigerian Treasury bills auctions as banks stepped up bets on short-term investment instruments.
Market analysts anticipate that the financial system liquidity would remain comfortable, supported by the N734.81 billion inflows from matured Treasury bills.
Consequently, short-term funding rates are expected to remain relatively stable, with OBB and Overnight rates likely to stay around current levels, barring significant changes in system liquidity.

