Money market rates in Nigeria have increased moderately due to tight liquidity conditions in the banking sector. Despite a temporary improvement in financial system liquidity, the impact of a ₦650 billion Treasury bills auction on Wednesday has led to higher interbank borrowing costs.
Financial analysts predict that banking system liquidity will remain under pressure as banks adjust to these liquidity shifts. Although liquidity improved today, interest rates moved higher due to expectations of further outflows related to the Treasury bills auction.
Short-term interest rates in the money market remain attractive, and analysts believe they will stay high even if the CBN decides to lower rates in its next monetary policy meeting.
Data from the FMDQ platform shows that:
- The Open Buy Back (OPR) rate increased by 8 basis points to 26.50%.
- The overnight lending rate (O/N) rose by 9 basis points to 26.92%.
- The Nigerian Interbank Offered Rate (NIBOR) increased across most tenors, except for the overnight rate, which declined slightly by 0.07% to 26.79%, indicating that liquidity remains relatively stable despite fluctuations.
However, once funds are debited for Treasury bills, liquidity is expected to drop further, which may push money market rates even higher unless there are additional inflows.
On Wednesday, the banking system’s liquidity dropped by 11%, opening the day with a surplus balance of ₦519.11 billion.
