Rates Ease, CBN Tightens Liquidity in Banking System
The short-term benchmark interest rates ease even as the financial system liquidity plunged sharply into deficit following settlement of OMO bill auction on Wednesday. The Central Bank of Nigeria (CBN) had floated bills worth N600 billion via an open market operation with target to reduce excess liquidity level in the financial system.
The authority received higher subscriptions from eligible investors, raising N2.12 trillion instead of the amount of OMO bills floated for sales.
With the payment for the OMO bills from investors, the CBN has successfully eliminated excess liquidity balance in the financial system. But rates failed to spike as demand for funds remained under control even with some banks increasing activities at the standing lending facility.
Investment banking firms reported that funding level declined significantly to a deficit of ₦1.6 trillion from the surplus of ₦2.3 trillion as banks and foreign portfolio investors settled the CBN OMO allotment.
Banks become active at the CBN standing lending facility window to augment liquidity demand for daily operations.
Money market rates moderated as a result. The Open Repo Rate (OPR) dropped by 60 bps to 26.60%, while the overnight rate eased by 50 bps to 27.00%, suggesting non-biting funding pressures in the market.
Analysts said they expect rates to remain around current levels tomorrow, amid the impact of the NTB auction settlement.
Interbank rates (NIBOR) declined across key maturities, reflecting the liquidity conditions in the banking system. Specifically, the overnight, 1-month, 3-month, and 6-month rates fell by 26 bps, 9 bps, 8 bps, and 23 bps, respectively.
The Nigerian Interbank Treasury Bills True Yield (NITTY) curve recorded yield declines across all maturities, indicating sustained buying interest in the market. However, the average yield on treasury bills remained unchanged at 17.78%, reflecting a balanced demand-supply dynamic in the secondary market. Naira Exchange Rates Gap Narrowed Amidst Bullish Expectations
