Money market rates surged following liquidity pressures caused by outflows tied to the Central Bank of Nigeria’s (CBN) Treasury auction on Wednesday. These outflows led to a decline in the financial system’s liquidity balance.
Data revealed that the system’s surplus balance, which stood at approximately ₦804 billion on Wednesday, dropped to ₦627 billion by Thursday’s trading close.
Market analysts noted a negative response in short-term benchmark interest rates due to tightened liquidity conditions. However, Cowry Asset Limited highlighted that the Nigerian Interbank Offered Rate (NIBOR) increased across most maturities, with the exception of the overnight NIBOR, which declined slightly. This suggests that despite the liquidity pressures, the banking system maintained relative stability.
AIICO Capital Limited explained that system liquidity experienced a minor dip, attributed to the settlement of Nigerian Treasury bills, which resulted in a net debit of ₦173.44 billion.
Figures from the FMDQ platform showed an uptick in interbank rates. The Overnight Policy Rate (OPR) rose by 50 basis points (bps) to 26.86%, while the Overnight Rate (O/N) climbed by 75 bps to 27.46%.
TrustBanc Financial Group reported that the Treasury bills auction settlement depleted the banking system’s liquidity by 22%, bringing the opening balance to ₦626.50 billion, down from ₦803.7 billion recorded the previous day.
“Given the current system liquidity balance, we anticipate funding rates will hover around prevailing levels,” TrustBanc stated in its market update.
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