Short-Term Rates Diverge, Banks Intensify Borrowing from CBN
The short-term benchmark interest rates swung both ways as deposit money banks intensified borrowing from the Central Bank of Nigeria (CBN) standing lending facility window over squeezed liquidity conditions.
With the desire to meet their daily liquidity requirement, some banks with funding gaps accessed funds from the Apex Bank window on Monday, after a few days of inaction. To strike a liquidity balance, the CBN successfully mopped up excess funds by selling OMO and Treasury bills worth N2.3 trillion last week.
At the beginning of the week, banking system liquidity remained positive but moderated, as system balances fell by N436.38 billion, AIICO Capital Limited said in an update. This prompted banks to increase their use of the standing lending facility window, with borrowings rising sharply to N186.3 billion from N25 billion previously, the investment firm said in its latest update.
Despite the tighter liquidity backdrop, funding costs eased slightly as the Overnight Policy Rate (OPR) dipped 8 bps to 26.42%, while the Overnight (O/N) rate held at 27.00%. Market participants anticipate that the short-term benchmark interest rates are expected to remain at a similar level, except for any significant funding activity.
Interbank rates (NIBOR) advanced across major tenors, driven by persistent liquidity pressures in the banking system, Cowry Asset Limited said in its note. Specifically, the overnight, 1-month, 3-month, and 6-month NIBOR rates increased by 5 bps, 11 bps, 9 bps, and 5 bps, respectively.
The Nigerian Interbank Treasury Bills True Yield (NITTY) curve advanced across most maturities, with the average secondary market yield rising by 3 bps to 17.88% amid stronger investor demand. #Short-Term Rates Diverge, Banks Intensify Borrowing from CBN Lafarge Africa Gears Up for Historic Profit, N1trn Revenue in Sight –CSL
