Nigeria’s interbank money market witnessed mixed movements on Wednesday as deposit money banks adjusted their liquidity strategies, following a slowdown in placements at the Central Bank of Nigeria (CBN) window. The overnight rate dipped by 0.2 percent to 24.83 percent, driven by improved system liquidity, which exceeded ₦1.6 trillion.
Market analysts attributed the liquidity boost to the maturity of ₦300 billion worth of Open Market Operation (OMO) bills on Tuesday, which injected fresh cash into the banking system. Despite this inflow, overall funding levels closed lower compared to the more than ₦2 trillion surplus recorded previously.
Commercial banks have continued to channel surplus funds to the CBN’s standing deposit facility (SDF) to earn the benchmark deposit rate of 24.5 percent—considerably higher than the returns currently available on Nigerian Treasury Bills (NTBs).
However, industry watchers observed that despite positive macroeconomic indicators, many banks have become more conservative in their lending activities. This shift, analysts noted, stems from rising loan defaults and recent regulatory measures tightening the single obligor limit and phasing out previous forbearance policies.
AIICO Capital Limited, in a market update, disclosed that the value of banks’ placements at the CBN’s deposit window declined to ₦1.4 trillion, even after accounting for a ₦194.3 million bond coupon inflow. The report also highlighted that some liquidity-constrained banks resorted to borrowing from the CBN’s Standing Lending Facility (SLF) to meet their short-term obligations.
By the end of the trading session, the overnight rate had inched up by three basis points to 24.90 percent, while the open purchase rate (OPR) remained steady at 24.85 percent. Analysts expect funding costs to remain broadly stable in the near term, barring significant market interventions or large-scale liquidity shifts.
In the Treasury Bills secondary market, yields reflected divergent trends. Short-term tenors, including the 1-month, 3-month, and 6-month papers, dropped by 1 bp, 4 bps, and 6 bps respectively. Conversely, the 12-month tenor advanced by 10 bps, signaling selective investor repositioning towards longer-dated instruments.
Despite these mixed patterns, the average yield on Nigerian Treasury Bills fell marginally by 1 bp to settle at 17.37 percent. This downward movement underscores sustained bullish sentiment and resilient investor appetite in the fixed-income secondary market.
Market analysts anticipate that if liquidity remains robust and inflation expectations moderate, the bullish momentum in the Treasury Bills market may persist in the short term.
