Interbank rates dropped significantly as the money market gained more liquidity following an increase in inflows. On Thursday, the financial system’s liquidity balance rose beyond the funding needs of local banks.
Despite foreign exchange (FX) settlements today, liquidity in the financial system remained positive and improved, with funding rates dropping considerably. According to market data, the system’s liquidity balance grew by 31%, ending the month with a strong surplus of ₦466.59 billion.
Analysts observed that money market outflows from primary market auction sales, such as Open Market Operations (OMO) bills, were lower than in September. Last month saw three OMO auctions due to substantial inflows from FAAC disbursements and coupon payments, unlike October, which saw fewer outflows.
As a result, Nigerian interbank borrowing rates (NIBOR) decreased across all terms, indicating better liquidity conditions in the banking system, according to Cowry Asset Limited. Short-term interest rates dropped below 22% for the first time in weeks as banks held excess liquidity.
With minimal funding pressures, the Open Repo Rate (OPR) fell by 317 basis points, closing at 21.14%. Similarly, the overnight lending rate (O/N) dropped by 355 basis points to 21.45%, while the central bank’s standing lending facility rate held steady at 31.75%.
CardinalStone Limited also noted a decline in money market rates, which was supported by activities at the Standard Deposit Facility (SDF) window.
Liquidity pressures in the financial market startedeasing last week. On Friday, the banking system ended the week with a surplus of ₦183.98 billion, mainly from FAAC disbursements and a ₦154 billion CRR refund, providing much-needed relief after 11 days of tight liquidity, according to TrustBanc Financial Group.
