Short-term benchmark interest rates in Nigeria’s money market have dipped significantly due to an influx of liquidity inflows, improving the financial system’s balance after weeks of deficit.
Recent data revealed a sharp retreat in interbank rates, driven by substantial inflows that reversed the prolonged liquidity crunch. In response to the tight liquidity conditions, Nigerian banks borrowed a total of ₦8.3 trillion from the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF) to meet operational funding needs. However, analysts predict that borrowing activities from the CBN window will decline as inflows continue to enhance liquidity levels.
According to TrustBanc Financial Group, the banking system transitioned from an eight-day deficit streak to a surplus of ₦451.06 billion at the start of the week. The group noted a significant drop—approximately 870%—in SLF usage by deposit money banks (DMBs), which fell from ₦679.10 billion to ₦70 billion, marking the lowest level in nine days.
Benchmark Rates and NIBOR Movements
Market watchers highlighted a significant decline in short-term benchmark interest rates, falling below 28% for the first time in weeks. Previously tight liquidity conditions had kept rates elevated.
The Nigerian Interbank Offered Rate (NIBOR) showed mixed movements, with most maturities seeing increases except for the Overnight NIBOR, which declined by 1.12% to 29.63%, reflecting improved liquidity. FMDQ platform data confirmed that the Overnight Policy Rate (OPR) fell by 2.07% to 27.18%, while the Overnight Rate (O/N) dropped by 2.02% to 27.89%.
AIICO Capital Limited attributed the easing liquidity pressures to various inflows, including FAAC disbursements, Remita payments, and Federal Government bond coupon payments totaling ₦10.17 billion.
