Short-term benchmark interest rates climbed on Monday, as liquidity in the Nigerian financial system tightened due to foreign exchange (FX) sales by the Central Bank of Nigeria (CBN). The Nigerian Interbank Offered Rate (NIBOR) increased across all tenors, reflecting the impact of reduced system liquidity.
Despite this, major money market indicators such as the open repo rate and overnight lending rate also rose, gaining 0.08% and 0.25%, respectively, to close at 26.67% and 27.21%.
According to market reports, interbank liquidity remained under pressure despite an inflow of ₦28.11 billion from Federal Government of Nigeria (FGN) bond coupon payments. Analysts attributed the strain primarily to FX debits by the CBN, which offset the effect of the bond inflows.
The banking system opened the week with a strong liquidity position of ₦290.7 billion, bolstered by the bond coupon injection. However, this was not sufficient to counterbalance the liquidity drag from CBN’s FX interventions.
In the treasury bills market, the Nigerian Interbank Treasury Bills True Yield (NITTY) curve declined across all maturities, signaling bullish investor sentiment. Nonetheless, increased sell-offs pushed the average yield higher by 0.07 percentage points, closing at 21.13%.
Looking ahead, analysts at TrustBanc expressed optimism for improved liquidity conditions. “Barring any unforeseen outflows, we expect liquidity to remain in surplus, and interbank rates to trend slightly lower, supported by further bond coupon inflows,” the firm noted.
