Short-Term Benchmark Interest Rates Ease on Liquidity Surplus
Excess liquidity in the banking system kept short-term benchmark interest rates at a floor in the absence of significant mop-up last week. The money market witnessed relative funding stability despite the absence of fresh liquidity injections from the Central Bank of Nigeria (CBN).
The liquidity balance in the financial system remained comfortable, with the week opening at a healthy net surplus, averting any significant scramble for funds among financial institutions, analysts at Cowry Asset Limited said.
The financial system liquidity opened at ₦1.30 trillion ahead of CBN open market operations targeted to reduce surplus funds. The authority offered N600 billion in OMO bills at the auction floated on Monday, recording significant subscription. The Apex Bank raised N1.55 trillion, and the settlement placed mild upward pressure on funding costs.
During the midweek, liquidity rose to ₦1.28 trillion, despite outflows from the July bond auction conducted by the debt office, which took out ₦185.93 billion from the financial system. Toward the end of the week, liquidity strengthened further, buoyed by increased placements at the CBN’s Standing Deposit Facility (SDF), which climbed to around ₦1.30 trillion.
“While this underscored ample system liquidity, part of it was sterilized through the standing deposit facility,” according to AIICO Capital Limited. The investment firm reported that the financial system liquidity expanded by roughly ₦261.25 billion week on week to close at ₦1.61 trillion on Friday.
Funding costs remained broadly stable, with the open repo rate unchanged at 26.50% and the overnight lending rate easing marginally by 2bps to 26.90%. Analysts expect the financial system liquidity to remain steady in the new week, keeping rates near current levels unless funding pressures emerge.
Looking ahead, a total of N258.63 billion in treasury bill maturities is expected to hit the system next week. However, the CBN. However, any OMO auction by the CBN could push rates higher, AIICO Capital Limited said.
The Nigerian money market maintained relative stability this week, despite the absence of fresh liquidity injections from the Central Bank of Nigeria (CBN). System liquidity remained comfortable, with the week opening at a healthy net surplus, averting any significant scramble for funds among financial institutions.
Data from the FMDQ platform showed that Open Buy Back (OBB) rates remained unchanged at 26.50%, while the Overnight (O/N) lending rate dipped marginally by two basis points to close at 26.90% from 26.92%. CBN Spot FX Rate Dips Amidst Rising Foreign Reserves
