Nigeria’s money market recorded a significant shift last week as surplus liquidity in the financial system crossed ₦4 trillion, leading to a sharp fall in short-term rates.
According to a market review by AIICO Capital Limited, overall liquidity expanded by ₦2.352 trillion week-on-week, closing at ₦4.018 trillion on Friday. The increase was largely supported by a wave of inflows from maturing instruments and the absence of a fresh primary market auction.
Deposit Money Banks (DMBs) were active at the Standing Deposit Facility (SDF) window, placing excess funds daily between ₦1.70 trillion and ₦3.73 trillion. The volume of placements grew towards the end of the week, reflecting a market environment free of funding stress.
This robust liquidity backdrop coincided with the Monetary Policy Committee’s decision to cut the benchmark interest rate to 27.00% and adjust the policy corridor, easing overall funding costs.
The Central Bank of Nigeria (CBN) also credited banks following repayments of Open Market Operation (OMO) bills and over ₦460 billion in additional primary market maturities, leaving the system with an even higher surplus.
Despite debits for Cash Reserve Ratio (CRR) applied on some lenders for failing to meet loan-to-deposit thresholds, the financial system remained well-supplied. Analysts at Cowry Asset Management noted that the apex bank’s dovish stance — lowering the CRR on DMB deposits to 45% while imposing 75% on non-TSA deposits — added to the liquidity build-up.
As a result, Nigerian Interbank Offered Rates (NIBOR) crashed across maturities, dropping by 2.06 percentage points week-on-week to 24.78%. Benchmark funding costs followed the same trend, with average rates falling 204 basis points to 24.69%. The Open Repo Rate (OPR) declined to 24.50%, while overnight lending eased to 24.88%.
The Nigerian Treasury Bills Market Index, however, delivered mixed outcomes. The 12-month paper eased by 17 basis points to 19.10%, but shorter and medium-term maturities climbed higher as investors demanded stronger yields.
Looking ahead, analysts expect additional inflows of about ₦450 billion from maturing OMO bills to support system liquidity this week. However, the upcoming Federal Government bond issuance may absorb part of the surplus, keeping funding rates aligned with the higher band.
