Interbank lending rates climbed higher amid tightening liquidity conditions in the Nigerian financial system after deposit money banks settled their obligations to the Asset Management Corporation of Nigeria (AMCON).
The increased funding pressure saw the banking system’s deficit balloon to N280.57 billion, a daily increase of N118.11 billion, signaling a squeeze in available cash for overnight lending and short-term borrowing.
According to data from the FMDQ Exchange, money market rates remained at elevated levels as monetary authorities maintained a tight grip on liquidity. The Central Bank’s aggressive open market operations (OMO) continued to mop up excess cash, pushing banks to increasingly rely on the Standing Lending Facility (SLF) at the policy rate floor to meet short-term funding needs.
“The system opened the week with a liquidity surplus, peaking at N1.53 trillion mid-week,” a market analyst explained. “However, post-auction, the market quickly flipped into a deficit, closing the week at N118.22 billion negative.”
In the absence of significant inflows and with virtually no major maturities from fixed income instruments expected, analysts warned that rates could remain under upward pressure in the coming days.
Reflecting the tighter liquidity environment, the Open Repo Rate (OPR) and overnight lending rate rose by 67 and 50 basis points to 32.17% and 32.67%, respectively. The Nigerian Treasury Bills True Yield (NITTY) curve also shifted upward across most maturities as yields advanced on short- and medium-term instruments. Meanwhile, profit-taking in the secondary market induced a mildly bearish tone, pushing the average yield up by 1 basis point to 18.36%.
“With limited inflows expected tomorrow, interbank rates are likely to stay elevated at current levels,” a fixed income trader noted. Market watchers continue to monitor the liquidity situation closely, as further tightening could trigger increased borrowing costs across sectors.
