Cowry Asset Limited said that funding rates in the money market increased as most Nigerian deposit money institutions sought liquidity to satisfy their funding requirements.
According to Afrinvest Limited, banks increased their borrowing from the Central Bank of Nigeria’s standing lending facility (SLF) by N3.4 trillion last week to fulfill their liquidity requirements. The large inflow of cash increased liquidity in the banking system, with the ending balance at N1.1 trillion, 75.3% higher than the previous week’s level.
According to Afrinvest, the sums were covered by ₦858 billion in primary market repayment and ₦3.4 trillion in Standing Lending Facility, respectively. Despite the inflows, short-term benchmark interest rates have risen beyond 30% following debits for the May 2024 FGN bond auction of N682.07 billion.
Liquidity level was further impacted by cash reserve ratio maintenance and CBN’s FX sales during the week. Last week, the average system liquidity closed at a net long position of N834.21 billion from a net long position of N401.26 billion in the prior week.
Again, deposit money banks have started to raise funds from the CBN window this week due to insufficient liquidity in the system. This has negative impacts on the Nigerian interbank borrowing rate (NIBOR) which saw a significant uptick of 8 percentage points to reach 30.96%, according to Cowry Asset Limited.
The investment firm stated also that the 1-month, 3-month, and 6-month interbank borrowing rates experienced upward movements to 24.50%, 24.83%, and 26.04%, respectively.
Data from FMDQ Exchange revealed that key money market rates, like the open repo rate (OPR) and overnight lending rate saw modest shifts to 31.47% and 32.07% as demands for funds increased amidst weak liquidity in the system.
Analysts at Cordros Capital Limited expect inflows from this month’s FAAC disbursements worth N817.67 billion to support financial system liquidity this week and thus, anticipate the overnight lending rate would temper from current levels.
