Surplus liquidity across Nigeria’s financial system has helped sustain low short-term interest rates, with minimal fluctuations recorded in the interbank market during the past week. The Central Bank of Nigeria (CBN) refrained from introducing any major fresh liquidity injections, yet the system remained adequately funded.
Analysts from Cowry Asset Management noted that money market stability was supported by a solid opening position of ₦1.30 trillion in net system liquidity. This cushion helped avert any major funding pressures among financial institutions.
Despite the relatively high system liquidity, the CBN conducted Open Market Operations (OMO) on Monday, offering ₦600 billion in bills. Demand from investors was substantial, and the central bank ultimately raised ₦1.55 trillion, introducing mild upward pressure on funding rates.
Interestingly, even with this liquidity drain, midweek balances climbed back to ₦1.28 trillion, absorbing the ₦185.93 billion outflow from the Debt Management Office (DMO) bond auction. By the week’s end, overall system liquidity rose again to approximately ₦1.30 trillion, with a boost from placements in the apex bank’s Standing Deposit Facility (SDF).
AIICO Capital Limited noted that although surplus funds remained in circulation, some of that liquidity was absorbed via the CBN’s sterilization efforts. According to the investment firm, liquidity levels expanded by approximately ₦261.25 billion, reaching ₦1.61 trillion by the close of the week.
As a result, funding costs experienced marginal changes. The Open Repo (OPR) rate held firm at 26.50%, while the Overnight Lending Rate (O/N) ticked down slightly by 2 basis points to 26.90%, according to trading figures published on the FMDQ platform.
Looking ahead, analysts expect the financial system to retain its current level of liquidity, barring any unexpected funding pressures. However, a total of ₦258.63 billion in maturing treasury bills is set to enter the system next week, which could influence short-term interest rates depending on whether the CBN decides to initiate another OMO auction.
In the interim, the Nigerian money market remains tranquil, showing resilience despite macroeconomic headwinds and regulatory adjustments. Analysts believe that the consistency in short-term benchmark rates, especially in the face of active monetary interventions, highlights the robustness of current liquidity conditions.
