Rates Heighten as Banks’ Borrowings from CBN Surge
The short-term benchmark interest rates heightened as activities of the deposit money banks (DMBs) tightened the liquidity balance in the financial system even further on Thursday.
In the absence of significant inflows, money market rates were pushed above the 32% level, a rare case in months. There will be no significant inflow on record to redirect the deficit position in the banking system, and projections show rates will remain elevated till next week.
Recent past open market operations and treasury bill sales reduced the amount of free cash in the financial system, and banks’ positions shifted from depositing to accessing funds from the standing lending facility of the Central Bank (CBN) for the third consecutive trading session this week.
The deficit position in the banking system widened to N35.30 billion, as heavy reliance of local banks on the CBN’s standing lending facility increased to N311.53 billion, investment firm AIICO Capital Limited said in an update.
Consequently, funding costs inched higher, with the Overnight Policy Rate (OPR) rising by 20 basis points to 32.30%, while the overnight lending rate edged higher by 10 basis points to 32.60%.
Interbank rates (NIBOR) posted mixed movements across major tenors, Cowry Asset Limited said in a report. Analysts noted that the overnight and 6M rates advanced by 43 bps and 19 bps, respectively, while the 1M and 3M benchmarks declined by 5 bps and 1 1bp.
The market anticipates that money market rates will remain at a similar level, except for any significant inflows.
Meanwhile, the Nigerian Interbank Treasury Bills True Yield curve advanced across all maturities, even as mild investor demand in the secondary market pushed the average yield down slightly by 1 bp to 17.93%. #Rates Heighten as Banks’ Borrowings from CBN Surge Interbank Rates Reset as Financial System Liquidity Rebounds
