Short-term interest rates in Nigeria’s money market dropped sharply on Tuesday as a result of excess liquidity in the banking system, ahead of a scheduled treasury bills auction.
The decrease in rates follows reduced borrowing at the Central Bank of Nigeria’s (CBN) Standing Lending Facility and robust funding within the financial system. According to market analysts, bond coupon inflows of N145 billion offset recent FX settlement outflows by the CBN, maintaining a strong liquidity profile.
Cowry Asset Management reported that while Nigerian Interbank Offered Rates (NIBOR) showed upward movements across several tenors, the overnight rate fell by 1.32% to 28.18%.
Despite the broader upward movement in benchmark rates, the Open Repo (OPR) and Overnight Lending Rates both plunged by 5.10% and 5.08%, respectively, closing at 26.50% and 26.96%.
Meanwhile, yields on Nigerian Interbank Treasury Bills True Yield (NITTY) climbed across all maturities, with average yields rising 0.14% to settle at 21.04%, driven by strong selloffs from investors.
AIICO Capital Limited also confirmed the drop in overnight borrowing costs, stating that the OPR and O/N settled at 26.50% and 26.96%, respectively, reflecting ample system liquidity.
Last week, market liquidity slipped into negative territory, closing at -N103.01 billion, compared to a surplus of N303.04 billion in the preceding week — a 133.99% weekly decline. As a result, the OPR and O/N rates rose by 502 and 509 basis points to 31.60% and 32.05%, respectively, by Thursday.
