Short-term interest rates ended the week in mixed territory as commercial banks opted to channel excess funds to the Central Bank of Nigeria’s (CBN) Standing Deposit Facility (SDF), reflecting a lack of liquidity pressures despite the apex bank’s massive liquidity mop-ups.
According to Cordros Capital Limited, banks deposited a whopping ₦1.64 trillion at the CBN’s SDF window—an amount that earns returns below the Monetary Policy Rate (MPR). Analysts noted that this trend often indicates banks’ preference to safeguard surplus liquidity rather than engage in interbank lending.
“The SDF acts as a benchmark for interbank market conditions. When liquidity is abundant, banks are more inclined to place idle funds with the CBN,” Cordros stated.
Overall, the Nigerian financial system maintained a buoyant stance, closing the week with a net long position of ₦1.88 trillion—an increase from the ₦646.50 billion reported in the previous week. This came amid several inflows, including ₦984.22 billion in OMO maturities, allocations from 13% derivation funds, state-level disbursements, and Sukuk bond proceeds.
Despite liquidity draining operations by the CBN—including two open market operations that cumulatively absorbed more than ₦1.609 trillion—system liquidity remained firm. The auctions saw strong participation, with the central bank receiving ₦1.146 trillion and ₦687.13 billion in bids, ultimately allotting ₦1.127 trillion and ₦482.33 billion, respectively.
Market sentiment held steady, with the open repo rate unchanged at 26.50% and the overnight lending rate edging up by 3 basis points to 26.95%. Cordros attributed the rise in overnight rates to short-term funding pressures rather than a systemic liquidity squeeze.
Meanwhile, the Nigerian Interbank Offered Rate (NIBOR) displayed a mixed pattern across maturities. The overnight and 3-month tenors slipped by 4 and 7 basis points, respectively, while the 1-month rate saw a marginal uptick of 1 basis point.
Looking ahead, analysts expect inflows from OMO maturities worth ₦239.15 billion to provide temporary relief. However, this may be offset by upcoming OMO auctions totaling ₦600 billion and potential Treasury bill settlements, which could push short-term rates toward the 30% threshold
