Money market rates showed mixed movements on Thursday as the liquidity deficit in the banking system eased. Short-term benchmark interest rates remained at double-digit levels, with analysts predicting that banks may need to start borrowing to meet their funding requirements.
While liquidity in the banking system remained negative, it saw a slight improvement compared to midweek levels. The system’s deficit narrowed to N938 billion on Thursday, down from N2.306 trillion on Wednesday, aided by inflows from matured borrowing instruments.
Despite this improvement, the Central Bank of Nigeria (CBN)’s Open Market Operation (OMO) auction on Tuesday continued to drain liquidity from the market. As a result, funding rates across banks increased, albeit at a slower pace than seen on previous days.
The Nigerian Interbank Offered Rate (NIBOR) declined across most maturities, indicating a slight improvement in banking system liquidity. However, data from the FMDQ platform showed that the repo rate (OPR) rose by 13 basis points to 32.03%, reflecting lingering liquidity pressures. Meanwhile, the overnight lending rate (O/N) remained stable at 32.53% due to limited activity among local lenders.
“We anticipate interbank rates will remain elevated, given that the liquidity situation is unlikely to improve significantly,” noted AIICO Capital Limited in a report.
In a similar update, TrustBanc Capital Limited confirmed that the deficit in the banking system improved by 59%, beginning the day with a shortfall of N938.10 billion. The firm advised investors that, without substantial inflows, the banking system would likely remain in deficit by week’s end, keeping interbank rates elevated.
