Short-term Benchmark Interest Rates Rise over FX Settlement
Key money market indicators, the short-term benchmark interest rates, increased as Central Bank of Nigeria (CBN) foreign exchange market interventions settlement dragged liquidity level in the banking system.
The market was debited for the naira equivalent of FX intervention sales to deposit money market as part of an effort to strengthen forex market liquidity. Although system liquidity remained robust, interbank rates inched up to 27% levels, driven by outflows from CBN and FX settlement activities conducted at the beginning of the week.
Banks are still maintaining distance from the CBN standing lending facility, while cash-rich lenders continue to earn below the monetary policy rate on funds parked at the standing deposit facility.
The rate direction is expected to impact returns on mutual funds and other money market-linked investment assets. In the absence of significant funding pressures, banks’ return on free cash is also expected to be squeezed.
The Nigerian Interbank Offered Rate (NIBOR) rose across all tenors, reflecting current liquidity conditions in the banking system.
Meanwhile, key money market indicators also trended upward, with the Open Repo Rate rising by 0.40% to 26.90% and the Overnight Lending Rate increasing by 0.40% to 27.40%. The Nigerian Interbank Treasury Bills True Yield declined across all maturities, with the average treasury bills yield falling by 0.02% to 20.95%.
The overnight policy rate rose 40 bps to 26.90%, while the overnight rate increased 45 bps to 27.45%. Analysts said interbank rates are likely to hold steady tomorrow unless significant liquidity shocks emerge. Last week, system liquidity still closed in the positive at N685 billion from N1.25 trillion in the previous week, decreasing by 45.13% week on week.
The open repo rate remained flat at 26.50% for the second consecutive week, while the overnight rate edged higher by 12 bps to close at 26.95%. #Short-term Benchmark Interest Rates Rise over FX Settlement Otudeko: Court Adjourns to Allow for Continuation of Settlement Talk
