Liquidity Pressures Deepen Banks' Borrowings from CBN
CBN

Tight Liquidity Pushes Banks to Borrow from CBN

Raising interbank borrowing rates, liquidity pressure in the financial system is expected to worsen for the week as the market is debited for Treasury bills auction sales today. At the midweek, the apex bank conducted Nigerian Treasury bills auction sales.

Investors staked more than N1.54 trillion for an offer worth N303 billion.

Despite higher demand levels, the apex bank repriced rates on the treasury bills higher. In the money market, short-term benchmark rates have started to ascend due to the absence of inflows in the system. 

Local deposit money banks with liquidity requirements have started fresh visits to the CBN standing lending facility to shore up their daily positions.  Cash-rich local lenders, especially those operating in the tier-1 category have started demanding higher rates on free funds.

Data from FMDQ showed that the open repo rate (OPR) and the overnight lending rate (OVN) climbed, settling at 24.50% and 25.40%, respectively.

However, investors in fixed income securities maintained a cold outing in the Treasury bills secondary market as the average yield closed flat at 8.3%. Elsewhere, the average yield remained at 11.2% in the OMO segment.

In the bond market, the selling rally also pushed the average yield higher by 2 basis points to 14.1%. Analysts said Across the benchmark curve, the average yield advanced at the mid (+10bps) segment as investors sold off the APR-2029 (+29bps) bond.

However, the average yield was unchanged at the short and long ends of the curve.

Tight liquidity conditions translated into an upward movement across all maturities of the Nigeria Inter-Bank Offered Rate (NIBOR), Cowry Asset Management said. Notably, the three-month NIBOR rate increased by 88 basis points, reaching 14.43%. #Tight Liquidity Pushes Banks to Borrow from CBN  N6.9bn Fraud: Emefiele Allegedly Opts for Plea Bargain

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