Short-term interest rates in Nigeria’s money market edged higher during the past week, reflecting a deepening liquidity squeeze in the financial system, largely attributed to substantial withdrawals through the Central Bank of Nigeria’s standing deposit facility.
According to a market update by Afrinvest Limited, commercial banks collectively withdrew N1.4 trillion from the CBN’s standing deposit window, which exacerbated funding stress across the system and extended the previous week’s tight liquidity conditions.
The money market opened the week with a positive net liquidity position of N684.79 billion. However, this figure sharply declined to N423.82 billion midweek, following CRR (Cash Reserve Ratio) debits and foreign exchange settlements. This led to a surge in overnight lending costs, with the overnight rate peaking at 29.42% and the overnight policy rate touching 28.50%.
Liquidity conditions slightly improved toward the end of the week following inflows from FGN bond coupon payments totaling N175 billion, helping to moderate the rate hike, according to AIICO Capital Limited.
By the close of the week, the open repo (OPR) rate settled at 26.50%, while the overnight lending rate stood at 26.96%—both fluctuating within the expected 26.5%–27% band. These developments come ahead of expected inflows from OMO maturities worth N1.14 trillion and net Treasury Bill rollovers of N101 billion, which analysts believe could further ease liquidity and lower interest rates in the week ahead.
Cordros Capital Limited noted that system liquidity dropped significantly, ending the week with a net long position of N230.04 billion compared to N915.26 billion the previous week.
Meanwhile, the Nigerian Interbank Offered Rate (NIBOR) experienced declines across all tenors on Friday, reflecting the improved liquidity. Key money market indicators also followed a downward trend, with both the OPR and Overnight Lending rates dropping by 35 and 44 basis points respectively.
