Interbank interest rates remained stable as excess liquidity continued to circulate within Nigeria’s financial system, reflecting the absence of funding stress across money market activities. Strong liquidity conditions have supported orderly trading and borrowing dynamics among deposit money banks.
Banks have continued to place surplus funds at the Central Bank of Nigeria’s (CBN) Standing Deposit Facility (SDF) as the year began on a solid footing. These placements helped underpin the first Open Market Operations (OMO) auction of the year, reinforcing liquidity buffers across the system.
However, total SDF placements eased on Tuesday, indicating that system liquidity may be moderating ahead of debits related to the latest OMO bills issuance. The decline suggests that some liquidity is being redirected in anticipation of settlement obligations.
With excess cash still available, larger financial institutions sought higher-yielding investment opportunities, while smaller lenders accessed short-term funding through the CBN’s Standing Lending Facility (SLF) to meet operational needs.
According to a report by Broadstreet, market liquidity opened the day with a surplus balance of ₦4.12 trillion, representing an increase of ₦706.71 billion compared with the previous trading session.
AIICO Capital Limited attributed the liquidity boost to inflows of ₦1.37 trillion from maturing OMO bills. This occurred despite a reduction in placements at the CBN’s deposit window and ₦108.00 billion in borrowings via the standing lending facility.
During the session, the CBN conducted an OMO auction with a target size of ₦600 billion. However, total allotments reached ₦2.71 trillion across 161-day and 210-day tenors. Market participants expect settlement of the auction to tighten liquidity conditions later in the week.
Despite these developments, average funding costs remained largely unchanged. The Open Repo Rate (OPR) held steady at 22.50%, while the Overnight Rate (OVN) edged down marginally by one basis point to close at 22.71%. Overall, the average funding rate settled at 22.61%.
AIICO Capital Limited said it expects liquidity conditions to remain relatively robust in the near term, barring any significant outflows, with funding rates likely to trade within current levels.
In the Treasury Bills secondary market, yields showed mixed movement. Yields on one-month and three-month tenors rose by 10 basis points and 2 basis points, respectively. In contrast, six-month and twelve-month maturities declined by 15 basis points and 7 basis points.
The mixed performance resulted in an increase in the overall Nigerian Treasury Bills average yield, which climbed 19 basis points to 17.70%. Analysts said the rise reflects softening investor sentiment in the secondary market amid shifting liquidity dynamics.
