Short-term interest rates in Nigeria’s money market saw modest declines on Monday, driven by an upsurge in banking sector liquidity. According to market analysts, the financial system opened with a liquidity balance of ₦1.99 trillion, boosted by inflows from the Central Bank of Nigeria’s (CBN) Standing Lending and Deposit Facilities.
AIICO Capital Limited, in a note to investors, attributed the strong liquidity environment to increased activity in both standard deposit and lending channels.
Despite this, the interbank lending space showed mixed reactions. The Overnight Policy Rate (OPR) held steady at 26.50%, while the Overnight (O/N) rate climbed slightly by 8 basis points to 27.00%, reflecting the effects of the CBN’s recent OMO issuance.
In an effort to soak up excess liquidity, the CBN auctioned 204-day OMO bills with a stop rate of 23.87%. The auction was heavily oversubscribed, with total bids amounting to ₦1.63 trillion, far above the central bank’s offer size.
Barring any major funding flows, analysts anticipate that interbank rates will hover around current levels. Across all tenors, the Nigerian Interbank Offered Rate (NIBOR) trended higher, albeit marginally, with the overnight NIBOR nudging up by 0.05% to 26.88%.
Meanwhile, yields on Nigerian Treasury Bills experienced a downward movement across most maturities, as investors repositioned portfolios. Despite the general yield decline, the average secondary market yield edged up by 2 basis points to settle at 17.66% due to heightened selling activity.
The week began with a systemic liquidity shortfall of -₦499.69 billion, tightening further from -₦280.57 billion recorded previously. However, by the latter part of the week, liquidity improved significantly, closing at ₦112.14 billion and ₦134.56 billion on subsequent trading days.
Supporting this turnaround, banks placed a substantial ₦991.52 billion in the CBN’s Standing Deposit Facility (SDF), up from ₦146.65 billion earlier in the week. In contrast, the Standing Lending Facility (SLF) usage plunged from ₦916.08 billion to just ₦157.50 million, reflecting improved cash flow positions among banks.
