Rates Soar as Banks Borrow N1.8trn from CBN to Fund Operations
The interbank rates soared in the money market as local deposit money banks, DMBs, borrowed funds totalling N1.83 trillion from the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF) to reduce funding pressures.
Rates surged as the financial system stayed in a deficit position ahead of N800 billion Treasury bill auction scheduled for midweek by the monetary authority. Despite inflows from inflows from FGN bond coupons, the financial system faced a liquidity crunch, which forced banks to seek credit from the Apex Bank window.
On Wednesday, the Nigerian Interbank Offered Rate (NIBOR) declined across most tenors, while the overnight NIBOR remained unchanged within the range of 0% to 32.79%, Cowry Asset Limited said in a note.
According to data obtained from the FMDQ platform, key money market indicators trended upward, with the Open Repo Rate (OPR) increasing by 0.08% to 32.50% and the overnight lending rate rising by 0.05% to 32.88%.
The deficit in the banking system widened by about 105%, closing with a negative balance of ₦1.43 trillion as banks, and other market players geared up from the Treasury bills auction on Wednesday.
“Facing mounting short-term obligations, local banks turned to the CBN’s Standing Lending Facility, withdrawing ₦1.83 trillion to stay afloat”, TrustBanc Financial Group Limited said in its investor note.
The investment firm explained that with liquidity thinning out, interbank funding rates crept higher by over 5bps, settling at 32.50% and 32.88%, respectively.
“Barring any major inflow or refund, liquidity is expected to remain in deficit as the market prepares for the Nigerian Treasury bills auction worth ₦800 billion”, analysts said. #Rates Soar as Banks Borrow N1.8trn from CBN to Fund Operations NDLEA Intercepts US, Saudi Arabia-Bound Cocaine, Others
