Short-term interbank lending rates in Nigeria continued their upward trajectory, remaining above the 32% mark as a persistent liquidity shortfall gripped the banking sector, just days before the Central Bank of Nigeria (CBN) conducts its midweek Nigerian Treasury Bills (NTB) auction.
Although the apex bank scaled back on liquidity mop-up operations, the financial system remains significantly tightened—pressured by cash reserve requirements, foreign exchange market dynamics, and the Asset Management Corporation of Nigeria (AMCON) levy settlements.
This tightening trend has led to increased returns on money market instruments, benefiting liquidity-rich banks and fund managers who are able to channel excess cash into profitable short-term placements.
The CBN is set to offer N290 billion in Treasury bills at its primary market auction on Wednesday, a move anticipated to refinance maturing bills. Analysts suggest the auction could be oversubscribed due to the lack of recent monetary interventions.
Despite the injection of N74.34 billion in coupon payments on Tuesday, liquidity remained in deficit at N400.70 billion, according to a market report by AIICO Capital Limited. Banks continued to rely on the CBN’s standing lending facility to bridge funding gaps.
The money market showed mixed trends: the open repo rate (OPR) climbed by 8 basis points to 32.50%, while the overnight lending rate slipped by 8 basis points to 32.75%. Analysts believe that this reflects the market’s anticipation of higher borrowing costs, especially as banks with surplus funds demand premium rates for interbank lending.
Further coupon inflows worth N29.58 billion are expected to provide temporary relief. However, interest rates are likely to stay elevated as market participants remain fixated on upcoming Monetary Policy Committee (MPC) decisions concerning future liquidity control.
Meanwhile, the Nigerian Treasury Bills Yield Curve (NITTY) displayed marginal yield declines across several maturities. Trading in the secondary market remained subdued, as average yield dropped 5 basis points to 17.72%.
