The financial system’s liquidity constraints tightened further on Wednesday, leading to a rise in money market rates. This rate adjustment is expected to impact interest-bearing deposits and mutual fund accounts.
Short-term benchmark interest rates have been under pressure this week. The total balance in the financial system deteriorated further midweek due to a lack of significant inflows to support the funding needs of money market participants.
Cowry Asset Limited reported that the Nigeria Interbank Offered Rate (NIBOR) increased across most maturities, reflecting the tighter liquidity conditions. The Open Repo Rate (OPR) also rose by 13 basis points to 31.23% today due to the strain on liquidity.
Also, the overnight lending rate (O/N) increased by 11 bps to 31.64% in the absence of significant inflows from maturing instruments or FAAC credit. The direction of this money market movement impacts interest bearing deposits and mutual funds accounts, analysts said.
Analysts at AIICO Capital Limited predict that interbank rates will remain at similar levels on Thursday due to the lack of expected inflows.
The rise in money market rates on Wednesday is attributed to the ongoing tight liquidity conditions within the financial system, which lack adequate funding to support its operations.
This article was written by Tamaraebiju Jide, a student at Elizade University
