Interbank rates surged sharply at the beginning of the week, reversing a previous downward trend, as the financial system faced a liquidity squeeze with minimal inflows to improve market conditions.
Rates adjusted to market dynamics as demand for funding exceeded available liquidity. This was compounded by significant outflows linked to the Central Bank of Nigeria’s (CBN) cash reserves (CRR) maintenance debits on local deposit money banks.
Additionally, a major outflow from the settlement of Open Market Operations (OMO) bills auctioned to foreign investors and local banks last week added further pressure on liquidity. As a result, the Nigerian Interbank Offered Rate (NIBOR) increased across all maturities, signaling a tight banking system.
According to data from the FMDQ platform, interbank rates rose significantly, with the Overnight Policy Rate (OPR) climbing by 3.72% to 31.39%, and the Overnight Rate (O/N) rising by 3.83% to 32.00%.
Investment experts at AIICO Capital Limited highlighted that the week began with a liquidity deficit, primarily driven by a N772.93 billion debit from the OMO auction settlement and CBN’s CRR operations last Friday.
This shortfall was exacerbated by today’s OMO auction results, where N1.559 trillion was sold—substantially more than the N600 billion initially offered.
However, the financial system is expected to receive a liquidity boost on Tuesday with the maturation of OMO bills worth approximately N101.8 billion.
