Interbank funding rates surged in the Nigerian money market as system liquidity declined, following the Central Bank of Nigeria’s (CBN) foreign exchange sales to authorised dealer banks. The CBN has been actively supplying US dollars to stabilise the naira and improve FX market liquidity.
However, the dollar sales were debited from the naira balances of deposit money banks, significantly reducing overall liquidity in the financial system. This liquidity squeeze prompted an upward repricing of short-term benchmark interest rates, as banks responded to tighter cash conditions.
AIICO Capital Limited noted that despite the short-term liquidity pressure, market outlook remains stable, buoyed by expectations of ₦747 billion in inflows from the ₦1.578 trillion approved FAAC allocation, along with an ₦83.43 billion FGN bond coupon payment.
Reflecting the strained liquidity, the Nigerian Interbank Offered Rate (NIBOR) rose across all tenors. Key money market indicators also trended upward, anticipating relief from the upcoming government disbursements. As a result, the Overnight Policy Rate (OPR) increased by 9 basis points to 26.67%, while the Overnight Rate (O/N) climbed similarly to 27.13%.
System liquidity opened significantly lower, dropping 74% to ₦138.80 billion in surplus balance. Nevertheless, analysts at TrustBanc expect liquidity to remain positive in the near term, with interbank rates likely to trade around current levels—barring any major outflows.
Meanwhile, the Nigerian Interbank Treasury Bills True Yield (NITTY) posted mixed movements across tenors. Despite this, average yields edged higher by 0.05% to settle at 21.11%, driven largely by increased investor selloffs.
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