Interbank lending rates in Nigeria have surged as the recent government bond auction settlement drained liquidity from the financial system. The financial market saw a massive outflow due to the bond auction conducted by the Debt Management Office (DMO) earlier in the week.
On Wednesday, the settlement of Federal Government of Nigeria (FGN) bonds, worth approximately N910.30 billion, significantly reduced available liquidity. Market analysts expect some relief when funds from the Federation Account Allocation Committee (FAAC) disbursement enter the system.
As a result, the Nigerian Interbank Offered Rate (NIBOR) climbed across all tenors, signaling tighter liquidity conditions in the banking sector. Key money market indicators also reflected this trend. The Open Buy Back Rate (OPR) rose by 1.71% to 31.71%, while the Overnight Lending Rate increased by 1.64% to 32.21%.
Last week, system liquidity stood at a negative balance of -N722 billion, compared to the previous week’s -N3.10 trillion. This persistent liquidity squeeze has kept money market rates elevated at double-digit levels.
