Money market activities last week were characterized by relatively steady short-term interest rates, as the financial system maintained strong liquidity despite notable outflows.
With minimal funding strain, commercial banks eased on borrowing, while cash-surplus lenders continued to deposit surplus funds at the Central Bank of Nigeria (CBN). Consequently, the rate on idle funds remained anchored at the lower end of the monetary policy rate, discouraging excessive placements at the CBN’s standing deposit facility.
Despite the week’s significant financial outflows, the system closed with a net liquidity surplus, with expectations of further inflows poised to support money market positions.
According to Cowry Asset Management Limited, the Nigerian Interbank Offered Rate (NIBOR) fell across most maturities, except the overnight tenor, which edged up by 0.09% to close at 26.84%.
AIICO Capital Limited noted that market liquidity remained adequate throughout the week, beginning with a credit balance of N1.30 trillion and ending the week at N684.79 billion. This occurred despite major outflows, including a N756.74 billion Open Market Operation (OMO) auction, a net Nigerian Treasury Bills (NTB) settlement of N310.35 billion, and FX-related debits from the CBN.
Investment firms indicated that liquidity conditions were partially sustained by N239.15 billion in OMO bill maturities. The apex bank continued with its tight monetary stance, conducting a heavily oversubscribed OMO auction worth N500 billion, which exerted pressure on market funding.
Despite the liquidity drain, funding rates remained steady at elevated levels. The Overnight Policy Rate (OPR) was unchanged at 26.50%, while the Overnight Rate (O/N) increased slightly by 12 basis points week-on-week, closing at 26.95%.
Analysts expect liquidity in the banking system to stay healthy in the coming week, supported by N175 billion in coupon payments from Federal Government bonds and anticipated allocations from the Federation Account Allocation Committee (FAAC). This is likely to keep short-term rates anchored near current levels.
Cordros Capital Limited reported that the average net system liquidity, though still positive, dipped to N915.26 billion from N1.36 trillion recorded the previous week.
