Nigeria’s short-term benchmark interest rates tightened last week as strong liquidity conditions in the financial system continued to ease funding costs, limiting the pressure on banks.
With minimal borrowing needs across the market, several cash-heavy lenders opted to sterilize excess cash by channeling more funds into placements with the Central Bank of Nigeria’s (CBN) deposit facility.
Analysts noted that the slowdown in the apex bank’s open market operations (OMO) has boosted available liquidity, reducing banks’ appetite for short-term instruments typically used to enhance returns.
According to data released by AIICO Capital Limited, system liquidity rose by ₦453.21 billion, lifting the market balance to approximately ₦2.12 trillion from ₦1.666 trillion recorded earlier. The surge was supported by a ₦245.4 billion increase in the Standard Deposit Facility (SDF) alongside ₦259.0 billion in coupon inflows.
At the interbank market, performance was mixed. Reports from Cowry Asset Management revealed that the Nigerian Interbank Borrowing Rate (NIBOR) showed varied movement, with the Overnight and one-month tenors climbing by 11 basis points and 18 basis points respectively.
Meanwhile, key money market indicators held steady. The Open Repo Rate (OPR) and Overnight Rate closed unchanged at 26.50% and 26.95%.
Liquidity conditions remained robust throughout the week, opening at ₦2.12 trillion compared to ₦2.09 trillion the previous week, before tapering to ₦1.67 trillion at Friday’s close. Reflecting this adjustment, banks scaled down their placements at the SDF from ₦1.75 trillion to ₦1.45 trillion as they balanced excess reserves with the CBN.
