Liquidity in Nigeria’s financial system came under pressure last week, driven by outflows from the Central Bank of Nigeria’s (CBN) swap arrangements, Open Market Operations (OMO), and Treasury bills auctions. These factors collectively pushed interbank rates higher week-on-week.
Analysts attributed the rise in money market rates to a tighter liquidity condition triggered by CBN activities that drained funds from the system.
Despite this, overall liquidity remained strong. Cordros Capital Limited reported that the average system liquidity stood at a net long position of ₦401.74 billion, compared to ₦461.76 billion the previous week. The marginal decline was offset by OMO maturities inflow of ₦164.68 billion on Tuesday, which eased borrowing from the CBN’s standing lending facility and prompted cash-rich banks to demand higher rates for surplus liquidity.
Consequently, short-term benchmark rates rose to between 28% and 30% in the absence of significant inflows. According to AIICO Capital Limited, system liquidity fluctuated throughout the week, initially dipping due to a late cash reserve maintenance event before rebounding from refunds and OMO maturities worth ₦300 billion.
Afrinvest Limited noted that a 2.1x week-on-week increase in banks’ and discount houses’ opening balances—reaching ₦405.7 billion—fueled this rebound. TrustBanc Financial Group Limited observed a slight uptick in average daily liquidity, rising 5% to ₦501.74 billion from ₦476.24 billion the previous week.
However, the CBN’s ₦500 billion OMO bill auction midweek reduced funding levels significantly, exacerbating liquidity constraints. AIICO Capital highlighted that Friday’s maturity of CBN swaps further strained the system, although the exact outflows were not disclosed.
The tightening liquidity environment led to a 92-basis-point increase in average interbank funding rates. Open repo and overnight lending rates settled at 27.29% and 27.86%, respectively.
In its weekly report, Cowry Asset Limited noted that the Nigerian Interbank Offered Rate (NIBOR) increased across most tenors, except for the overnight NIBOR, which fell by 0.15%, reflecting ongoing liquidity challenges.
Looking ahead, analysts anticipate a dip into negative liquidity territory this week due to swap maturities and the impact of the Cash Reserve Requirement (CRR), despite an expected ₦270 billion OMO maturity inflow.
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