Money market rates experienced a notable decline during the week as Nigeria’s financial system grappled with a surge in excess liquidity. The interbank market was awash with funds, allowing deposit money banks to take advantage of above-average treasury bill rates offered through placements at the Central Bank of Nigeria (CBN) window.
According to a market update from TrustBanc Financial Group Limited, reduced liquidity mop-up activities by the CBN contributed to a stronger funding position within the financial system, maintaining short-term interest rates below the 25% threshold. Data showed that banks’ placements at the Standing Deposit Facility averaged ₦2.88 trillion, up from ₦2.02 trillion recorded the previous week.
By the end of the week, the banking system reported a ₦2.47 trillion liquidity surplus, down from an opening balance of ₦3.78 trillion. In the absence of funding strain, the average daily liquidity level for October increased by 9% to ₦2.96 trillion, compared to ₦2.71 trillion in September.
The overall funding outlook was further supported by inflows from the Federation Account Allocation Committee (FAAC) disbursements and other system credits, which helped offset early-week Open Market Operations (OMO) outflows. Market data also showed that ₦261.38 billion in bond coupon payments contributed to system liquidity, even as a midweek bond auction settlement of ₦313.77 billion exerted mild pressure on funds.
Despite temporary contractions caused by OMO and treasury bills auction settlements, the market maintained comfortable liquidity conditions. This stability kept interbank rates lower by an average of 14 basis points. The Open Repo Rate (OPR) slipped by 4 basis points to 24.50%, while the Overnight Rate (O/N) dropped 24 basis points to settle at 24.83% week-on-week.
With coupon inflows of about ₦261 billion expected from the April 2029, April 2032, and April 2049 bonds, analysts forecast that funding costs may decline further in the coming week, provided no significant liquidity-draining actions occur.
