Short-Term Rates Ease on Excess Liquidity in Banking System
The short term benchmark interest rates eased as money market remained flooded with excess liqudity, reflecting absence of funding pressures.
The money market has seen tight movement in short terms rates due to sufficient funding in the financial system since the last lap of year 2025. In an attempt to make their money work, deposit money banks have been staking bets on placements at the Central Bank standing despoit facility.
This market action has continued into the new year as system liquidity opened the first full week of the year with a surplus balance of ₦3.41 trillion, representing an improvement of ₦54.83 billion from the previous day.
Market update from AIICO Capital Limited revealed that the surge was driven by an increase in Banks placement in CBN’s Standing Deposit Facility (SDF) window, which rose to ₦3.21 billion and an inflow of ₦58.59 billion from bond coupon payment.
Consequently, average funding cost eased by 2bps to 22.61% as the Open Repo Rate (OPR) held at 22.50% while the Overnight Rate (OVN) dropped 4bps to close at 22.71%.
“We expect liquidity to stay relatively strong, barring any notable outflow and keep funding rate within the same range”, market analysts at AIICO Capital Limited said. #Short-Term Rates Ease on Excess Liquidity in Banking System#
Money Market Rates Diverge Amidst Robust System Liquidity
