Rates Hit Floor in Money Market, Banking Liquidity Remains Surplus
Surplus liquidity in the banking system kept the short-term interest rates benchmark at the floor in the absence of funding pressures. The financial system liquidity shrank, but the balance remained robust enough to keep rates movements in check.
The floor resistance short term rates suggests that money market interest rate have fallen to their lowest possible as the Central Bank of Nigeria (CBN) slowdown aggressive mop up actions.
Rates have been trending behind the CBN asymmetric corridor due to a spike in liquidity following failure to conduct an open market operation in the recent time despite heavy inflows.
Throughout last week, the interbank market sustained strong liquidity, keeping funding conditions stable and rates anchored at 26.5%. The repo rate held steady at 26.50%, while the overnight lending rate eased by one basis point week on week to close at 26.95% on Friday.
Liquidity was supported by inflows from ₦204.87 billion in OMO maturities, ₦141.71 billion in FGN bond coupons, and about ₦111 billion in CBN allocations to states, AIICO Capital Limited said in an update.
However, the firm noted that these were partly offset by significant outflows, including the ₦660 billion second tranche repayment of the Cross Currency Swap and a net Treasury bills settlement of ₦267 billion.
Despite the decline in system liquidity to ₦1.67 trillion from ₦2.1 trillion, overall market conditions remained comfortable, allowing rates to trade firmly without any major funding pressures.
Against this backdrop, banks with idle balances leaned heavily on the CBN’s Standing Lending Facility window to park funds, reflecting muted credit demand in the interbank market.
With sufficient liquidity, funding rates remained largely stable. Nigerian Interbank Borrowing Rate (NIBOR) was unchanged at 26.83% from last week’s close, while the 1-month tenor eased by 11bps, according to Cowry Asset Limited.
In a note, AIICO Capital Limited revealed expectation that rates will hold near 26.5% as anticipated inflows from OMO maturities totalling ₦254.90 billion and FAAC disbursements will support interbank liquidity.
Market analysts, however, hinted that the short term benchmark interest rates could rise if the CBN conducts aggressive liquidity absorption through an OMO auction.
Yields in the Nigerian Interbank Treasury Bills True Yield (NITTY) segment, however, declined sharply across the curve, pressured by renewed demand amid this week’s Treasury bill issuance aimed at mopping up liquidity.
In contrast, the secondary market for treasury bills experienced mild selling pressure, pushing average yields 130 bps higher to 18.48%.
Meanwhile, the NTB auction of September 17, 2025, reflected sustained investor appetite across all maturities. Total subscriptions amounted to N1.59 trillion against N290.0 billion on offer, underscoring the depth of liquidity in the system.
The 91-day and 182-day papers cleared at 15.00% and 15.30% respectively, while demand was heavily skewed toward the 364-day instrument, which drew bids of N1.48 trillion versus an offer of N200.0 billion.
The tenor eventually cleared at 16.78%, with N272.50 billion allotted. Looking ahead, system liquidity is expected to remain buoyant in the coming week, supported by anticipated maturities worth about N1.0 trillion. #Rates Hit Floor in Money Market, Banking Liquidity Remains Surplus GTCO Climbs with Significant Block Trade Deals
