Nigeria’s money market recorded sharp declines in lending rates on Wednesday, following a significant improvement in liquidity within the banking system.
According to the Central Bank of Nigeria (CBN), financial system liquidity jumped from a deficit of about ₦95 billion to a positive balance of ₦1.015 trillion, buoyed by inflows totaling ₦1.110 trillion.
Data from the FMDQ Securities Exchange showed that money market rates trended downward as a result. The Open Repo Rate (OPR) dropped by 580bps to 26.50%, while the Overnight Lending Rate fell 570bps to 27.00%.
The boost in liquidity was largely driven by the maturity of OMO bills worth ₦854.5 billion, which were not refinanced by the CBN as initially anticipated. Analysts believe this decision helped ease funding pressures in the banking sector.
Further inflows are expected from a ₦392.74 billion Federal Government bond coupon payment, due Thursday, which will add to system liquidity and potentially sustain the current downward trend in rates.
As liquidity conditions improved, banks’ reliance on the CBN’s standing lending facility reduced, keeping borrowing costs under control.
Cowry Asset Limited reported that Nigerian Interbank Offered Rates (NIBOR) fell across board: the overnight rate dipped by 2.57%, while the 1-month, 3-month, and 6-month tenors declined by 0.92%, 0.95%, and 0.89%, respectively.
However, the Nigerian Interbank Treasury Bills True Yield Curve trended upward, with yields rising by 13bps (1-month), 24bps (3-month), 18bps (6-month), and 20bps (12-month) maturities.
