Rates Swing as Banks Take Out N1.4trn from CBN Facility
The short-term benchmark interest rates climbed, albeit slowly, in the money market as the amount of liquidity in the financial system depressed further. Extending the previous week’s tight funding profile, the banking system experienced a funding shortfall that kept the liquidity level in negative note in the money market.
Afrinvest Limited said in an update that this shortfall was largely driven by N1.4 trillion ejection through the standing deposit facility of the Central Bank of Nigeria. Some market analysts highlighted that interbank market rates fluctuated last week but eased on Friday- citing inflows including N57 billion net cash reserve ratio credit by the CBN.
The market opened with ample liquidity at N684.79 billion but declined to N423.82 billion due to CRR debits and FX settlements. Consequently, rates peaked midweek, with the overnight rate hitting 29.42% and the overnight policy rate rising to 28.50%.
However, N175 billion in FGN bond coupon inflows later in the week improved liquidity, moderating rates, AIICO Capital Limited said in a note. By week’s close, the open repo rate settled at 26.50% and the overnight lending rate at 26.96%, both within the 26.5%–27% range.
The market anticipates an inflow of N1.14 trillion in OMO maturities and N101 billion in net treasury bill roll-offs should boost liquidity, potentially pushing rates toward a 26.5% low in the new week.
Accordingly, the average system liquidity settled at a lower net long position of N230.04 billion against a net long position of N915.26 billion in the previous week, Cordros Capital Limited said in its report.
On Friday, the Nigerian Interbank Offered Rate (NIBOR) declined across all tenors, reflecting enhanced liquidity conditions within the banking system. Similarly, key money market indicators trended downward, with the Open Repo Rate falling by 35 basis points to 26.50% and the Overnight Lending Rate dropping by 44 basis points to 26.96%. Renaissance Exceeds Oil Output Target by 40 % in One Month
