Nigeria’s money market saw a decline in funding costs this week even as the Central Bank of Nigeria (CBN) conducted a series of aggressive open market operations (OMO) to manage excess liquidity in the financial system.
The central bank intensified its liquidity management approach after previous OMO maturities significantly expanded banking system liquidity. Despite this, short-term interest rates remained largely unshaken, signalling robust liquidity conditions.
Market data indicated that the financial system opened Thursday with a surplus balance of ₦2.7 trillion, an increase of ₦220.2 billion from the previous session. Deposit Money Banks (DMBs) also maintained strong activity at the CBN’s Standard Deposit Facility (SDF), posting placements worth ₦1.5 trillion, according to AIICO Capital Limited.
The CBN absorbed ₦3 trillion through an OMO auction earlier in the week and followed up with another auction on Wednesday, allotting ₦909.4 billion across 174- and 188-day maturities.
Despite these liquidity-tightening measures, the average funding rate slipped by 14 basis points. The Open Repo Rate (OPR) declined by 10 bps to 24.50%, while the Overnight Rate (O/N) dropped 18 bps to 24.92%.
Analysts expect funding costs to rise gradually in the coming sessions as OMO and treasury bill settlements drain liquidity. However, they note that the expected inflow of ₦689.5 billion from maturing treasury bills could provide temporary relief.
In the secondary market, treasury bill yields recorded mixed movement as investor focus shifted toward the midweek primary auction.
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