Interbank rates were adjusted upward in response to the Central Bank of Nigeria’s (CBN) monetary policy tightening, despite the absence of liquidity pressure. The pricing of money market instruments has been affected by the rate hike, and is expected to impact the borrowing rate at the CBN’s standing lending facility (SLF).
According to analysts, today, despite a substantial liquidity balance in the financial system, money market rates edged higher. Conversely, as noted by the Cowry Asset Limited, the Nigerian interbank offered rates (NIBOR) declined across all tenors, reflecting overall system liquidity.
However, the open repo rate and overnight lending rate increased due to adjustments in the money market environment. Analysts indicated that the opening system liquidity improved further with additional credits entering the system.
FAAC inflows boosted the balance in the financial system, supplemented by inflows from matured OMO bills and bond coupon payments. Data from the FMDQ securities exchange platform revealed that the open repo rate (OPR) and the overnight lending rate (O/N) increased by 18 bps and 8 bps to 20.33% and 20.88%, respectively.
Weighing the impacts of rates adjusted made by the CBN, investment banking analysts at AIICO Capital Limited anticipate that interbank rates will increase in response to the recent MPC decision.
The two-day Monetary Policy Committee (MPC) meeting in September 2024 concluded with the Central Bank raising the benchmark lending rate by an additional 50 basis points to 27.25%. The committee considered inflation to remain high despite recent deceleration.
Other notable measures included raising the Cash Reserve Ratio (CRR) for commercial banks to 50.00% from 45.00% and increasing the CRR for other financial institutions to 16.00% from 14.00%.
