Ample liquidity in the Nigerian banking system helped anchor funding rates despite significant outflows from the recent settlement of the Federal Government’s Sukuk issuance. As at the close of trading, money market rates moved in mixed directions, buoyed by an estimated N1.6 trillion in net system liquidity.
According to a market update, financial system liquidity remained elevated, largely supported by continuous inflows into the Central Bank of Nigeria’s (CBN) Standing Deposit Facility (SDF). CardinalStone Partners Limited noted that this liquidity surplus persisted even after the Debt Management Office (DMO) settled N300 billion in Sukuk bonds.
Short-term benchmark interest rates stayed relatively stable, holding around 26.5%, as the market experienced little to no pressure at the CBN’s lending window. Reflecting improved liquidity conditions, the Nigerian Interbank Offered Rate (NIBOR) declined across all tenors. Cowry Asset Management reported that the overnight, 1-month, 3-month, and 6-month rates fell by 4 basis points (bps), 32bps, 18bps, and 40bps, respectively.
However, money market rates reflected mixed sentiments. While the Open Buy Back (OBB) and Open Repo Rate (OPR) were unchanged at 26.50%, the overnight lending rate inched up by 9bps to close at 26.95%. Analysts expect interbank rates to remain steady in the short term, barring any unexpected liquidity shocks.
In an effort to moderate excess liquidity, the Central Bank conducted two Open Market Operations (OMO) auctions, each offering N600 billion worth of bills. The auctions were met with strong investor demand, effectively absorbing the impact of over N900 billion in maturing OMO bills.
In the broader fixed-income market, the Nigerian Interbank Treasury Bills True Yield (NITTY) curve declined across most tenors, except for the 3-month benchmark, which rose by 12bps. Meanwhile, sentiment in the secondary market for Nigerian Treasury Bills remained bullish, with average yields falling by 2bps to 20.66%.
