Money market rates hovered near 30% on Thursday as the settlement of the Central Bank of Nigeria’s (CBN) open market operations (OMO) auction drained liquidity from the financial system. The apex bank offered ₦600 billion in OMO bills, attracting strong demand with bids totaling ₦2.17 trillion, and eventually allotted ₦1.25 trillion—further tightening system liquidity.
Following the large outflows, some deposit money banks and investment funds turned to the standing lending facility to meet their funding needs. The open repo rate jumped by 100 basis points to 29.75%, while the overnight lending rate climbed by 109 basis points to 30.42%, reflecting the liquidity squeeze as banks and foreign portfolio investors settled their OMO bill purchases.
The Nigerian Interbank Offered Rate (NIBOR) also moved higher across all maturities, in line with the tighter liquidity in the banking system.
Despite the pressure on liquidity, the secondary market for Nigerian Treasury Bills remained bullish, with strong investor demand pushing the average yield down by 8 basis points to 19.35%, according to Cowry Asset Management. The NTB curve declined across all maturities, indicating lower yields on short- and medium-term instruments.
Unless significant inflows improve system liquidity, interbank rates are expected to remain elevated in the near term.
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