Short-term Interest Rates Rise as Banking Deficit Soars
The short-term benchmark interest rates soared in the money market as banking system deficit spiked. Liquidity balance declined following the Central Bank of Nigeria pending cash reserve ratio activities and debit for money market instruments.
This affected rates pricing ahead of Nigerian Treasury bills auction on Wednesday. Going to Thursday, the Nigerian Interbank Offered Rate (NIBOR) rose across all tenors, reflecting tight liquidity conditions in the banking system, according to Cowry Asset Limited investors’ note.
The deficit in the financial system increased by 80.26% to close at ₦308.33 billion, TrustBanc Financial Group Limited said in its market update, from N171 billion negative balance in the prior day.
The surge marked the fourth consecutive day of a negative balance. As a result, interbank funding rates, the open report and overnight lending rates increased by 8bps apiece.
The repo rate settled at 32.33% while the overnight lending rate printed at 32.75% in the absence of significant inflows into the financial system.
The Nigerian Interbank Treasury Bills True Yield (NITTY) rose across all tenors. Meanwhile, the secondary market for Nigerian Treasury Bills remained bullish, driven by strong investor demand, leading to a 1-basis-point decline in the average yield to 18.97% #Short-term Interest Rates Rise as Banking Deficit Soars FG Denies Diverting $3bn Railway Project
