Money market rates climbed on Tuesday following the Central Bank of Nigeria’s (CBN) open market operation (OMO) aimed at curbing excess liquidity in the financial system.
The apex bank offered ₦600 billion in OMO bills but saw an overwhelming demand, raising a total of ₦2.12 trillion from investors. The auction, designed to absorb surplus cash in the banking system, comes ahead of a ₦220 billion Nigerian Treasury bills auction scheduled for midweek.
Despite sustained market liquidity, the CBN’s liquidity management efforts are beginning to push short-term rates higher. Analysts say the settlement of the OMO auction is expected to drain available funds in the system, further tightening financial conditions by Wednesday.
According to a report from TrustBanc Financial Group, banks accessed ₦1.5 trillion from the Standing Lending Facility (SLF) after three days of inactivity, while placements at the Standing Deposit Facility (SDF) eased.
Meanwhile, interbank lending rates rose across all tenor buckets. The Nigerian Interbank Offered Rate (NIBOR) for the overnight tenor increased from 26.88% to 27.18%, reflecting rising funding costs. Similarly, the Open Repo (OPR) and overnight lending rates trended higher, despite the persistence of strong liquidity.
AIICO Capital Limited reported that liquidity in the banking system increased to ₦2.26 trillion, up from an opening balance of ₦1.21 trillion earlier in the day.
Even with the improved liquidity, average funding rates surged by 60 basis points to 27.35%, with the OPR rising 50bps to 27.50% and the overnight rate up 70bps to 27.20%.
Short-term interest rates are expected to remain elevated in the near term, barring any significant liquidity injections. As of last Friday, the financial system’s liquidity surplus stood at ₦1.61 trillion, up from ₦1.35 trillion the previous week—largely driven by potential FAAC inflows, which boosted activity at the CBN’s deposit window.
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