Rates Tighten, Banks’ Placements at Deposit Facility Rise
The short-term benchmark interest rates tightened as sufficient liquidity in the financial system restricted funding costs. The absence of significant funding pressure has kept rates restricted.
Banks’ borrowing activities have reduced, and some cash-rich lenders have continued to sterilise excess fund with constant placements with the Central Bank of Nigeria (CBN) deposit facility.
The CBN open market operations slowdown strengthened free funds available – keeping banks away from taking bet on short term instruments to augment earnings.
The system liquidity surged by N453.21 billion, according to market data released by AIICO Capital Limited. The amount pushed liquidity balance in the financial system to about N2.12 trillion, from N1.666 trillion.
The firm reported that the interbank market opened the week on a strong note, supported by improved system liquidity following a ₦245.4 billon increase in the Standard Deposit Facility (SDF) and ₦259.0 billion in coupon inflows.
The Nigerian Interbank Borrowing Rate (NIBOR) settled with varied outcome, with the Overnight and 1-month rates advancing by 11bps and 18 bps respectively, Cowry Asset Limited said in a note.
Money market funding rates remained persistent, with the Open Repo Rate (OPR) and Overnight rate unchanged at 26.50% and 26.95% respectively.
Last week, system liquidity opened the week at N2.12 trillion, above the N2.09 trillion recorded in the prior week, and trended higher through most of the week before easing to N1.67 trillion at the close on Friday.
Reflecting this pattern, placements at the SDF moderated slightly from N1.75 trillion at the start of the week to N1.45 trillion, as banks adjusted their excess balances with the CBN. #Rates Tighten, Banks’ Placements at Deposit Facility Rise Naira Mixed as FX Inflows Jump, External Reserves Cross $42bn
