Money market rates have spiked significantly as liquidity tightens in the financial system following a substantial debit from a recent OMO (Open Market Operations) auction. The Nigerian Interbank Offered Rate (NIBOR) rose across all maturities, reflecting a constricted liquidity environment in the banking sector.
According to MarketForces Africa, the Central Bank of Nigeria (CBN) held an OMO bills auction on Tuesday, targeting both local and foreign investors. Although the CBN initially offered N300 billion in OMO bills, investor demand surged, with bids totaling approximately N1.5 trillion, fueled by high liquidity at the week’s onset.
This large-scale debit from the auction significantly reduced system liquidity, driving short-term benchmark interest rates up to around 30% from 20% on Monday. System liquidity opened on a lower note, and interbank rates climbed considerably by the day’s end, according to analysts at AIICO Capital Limited.
Specifically, the overnight policy rate (OPR) jumped by 10.59% to 29.81%, while the overnight lending rate (O/N) increased by 10.67% to 30.36%, based on FMDQ platform data. Analysts anticipate that liquidity may turn negative due to the OMO auction settlement, likely keeping interbank rates elevated.
The CBN offered N300 billion across standard maturities in the OMO auction. Demand remained concentrated on the long end of the maturity spectrum, with total subscriptions reaching N1.45 trillion, creating a bid-to-offer ratio of 4.83x. The auction concluded with sales at a stop rate of 24.28%.
Last week, the overnight (OVN) rate dropped significantly, contracting by 10.46 percentage points week-on-week to 19.7%, mainly due to inflows from FGN bond coupon payments totaling N260.67 billion and OMO maturities worth N254.25 billion.
Cordros Capital Limited analysts noted that this rate drop marked the lowest point since February, when rates last dipped below 20.0%, reflecting robust liquidity in the financial system. Average weekly liquidity settled at a net long position of N390.67 billion, up from a net short position of N437.00 billion in the previous week.
