Due to an outflow from the Federal Government of Nigeria (FGN) bond auction, which reduced liquidity in the financial system, interbank rates in the money market showed mixed movements . The market reacted to a 50 basis point interest rate hike, expected to increase the rate at the apex bank’s standing lending facility.
A total of N264.53 billion was debited from the financial system, representing investors’ payments for FGN bonds sold by the Debt Management Office. On Monday, the debt office conducted a primary market auction, offering N150 billion worth of government borrowing instruments to market participants.
The auction was oversubscribed, driven by investor expectations of rate adjustments, disinflation, and a slowdown in bond supply. Consequently, the total outflow increased the negative balance in the financial market to N710.9 billion from N188.14 billion on Tuesday, according to Futureview Financial Limited.
Opening system liquidity declined due to the debits for the FGN bond auction, resulting in mixed interbank rates. The Open Repo Rate (OPR) decreased by 5 basis points to 20.28%, while the Overnight Rate (ON) increased by 7 basis points to 20.95%, as confirmed by data from the FMDQ platform.
Analysts told MarketForces Africa that the adjustment to the monetary policy rate will have widespread market impacts, noting that banks with strong cash profiles will seek or request higher rates from net borrower lenders.
According to Cowry Asset Limited, the Nigerian interbank offered rate (NIBOR), increased across all maturities, indicating system illiquidity.
