On Thursday, after the Central Bank of Nigeria (CBN) reopened the borrowing door for banks, money market rates fell dramatically due to the financial system’s strong liquidity.
The short-term benchmark interest rate fell to its lowest level in a long time, forcing market participants to part with extra cash at reduced rates.
According to Futureview Financials Limited, system liquidity increased to N356 billion due to fresh inflows.Cowry Asset Limited analysts reported in a market update that the Nigerian interbank offered rate fell by 0.09% to settle at 20.58%.
The investment firm noted that interbank offered rates fell on Thursday as liquidity-rich local deposit money banks sought lower rates on free cash in the money market.
According to data from the FMDQ platform, he Open Repo Rate (OPR) decreased by 287 basis points or 2.78% to close the day at 19.86%.
Likewise, the overnight lending rate declined by 271 basis points or 2.71% to 20.69%, due to improved liquidity. “We expect interbank rates to hover at similar levels tomorrow”, AIICO Capital Limited said in a note.
The Central Bank of Nigeria announced during the week it lifted suspension on its Standing Lending Facility for authorised dealers.
The Apex bank said that the suspension was lifted in alignment with the decision taken at the last Monetary Policy Committee meeting which adjusted the upper corridor of the standing facilities to 5.00 percent. from 1.00 per cent around the Monetary Policy Rate.
The CBN also announced an increase in rate at which banks would borrow from the window to 31.75 percent. The Standing Deposit Facility rate, applicable to deposits made by banks at the CBN, has been increased to 25.75 percent.
