Short-Term Interest Rates Rise as CBN Mops Up Liquidity
The short-term benchmark interest rates surged in the money market as the Central Bank of Nigeria (CBN) mopped up liquidity levels in the financial system.
The authority conducted an open market operation (CBN) to reduce the amount of free cash flow around in the money market, effectively reducing banks’ capacity to create credits.
The week had opened with excess liquidity levels in the financial system due to the absence of primary market auctions and foreign exchange market interventions in the previous week.
Yesterday, the CBN conducted simultaneous cash reserves ratio (CRR) debits and an OMO auction today, offering ₦600 billion across two mid-tenor instruments to tighten banking system liquidity.
The auction saw strong demand, with subscriptions reaching ₦1.151 trillion and allotments totaling ₦1,068.2 billion, a number of investment banking firms at Broad Street said in their separate update.
Market analysts said these combined operations tightened system liquidity considerably, pushing interbank rates higher. The Overnight Policy Rate (OPR) rose 183 bps to 28.33, while the overnight (O/N) rate climbed 184 bps to 28.83%.
The market expects a ₦985.89 billion inflow from OMO maturity on Tuesday. The huge amount is expected to bolster system liquidity, potentially easing interbank rates toward 26.5%, barring any significant offsetting outflows Nigeria Boosts Trade Surplus to N5.17trn as Imports Taper
