Short-term benchmark rates in Nigeria’s money market declined sharply last week following significant liquidity inflows that reversed earlier tight conditions.
Interbank rates had climbed above 32% at the start of the week due to funding pressures, pushing deposit money banks to rely heavily on the Central Bank of Nigeria’s (CBN) Standing Lending Facility. Average weekly borrowing surged to N360.19 billion compared with N294.60 billion in the prior week, according to Cordros Capital Limited.
Liquidity pressures initially worsened following the CBN’s open market operation (OMO) auctions and foreign exchange interventions, but conditions eased midweek as N854 billion in OMO maturities and N392.74 billion in FGN bond coupon payments hit the system.
These inflows supported a steep decline in interbank borrowing rates. By Friday, the open repo rate had dropped to 28.90% while the overnight rate settled at 29.15%, reversing the early-week highs.
However, the CBN later issued a N600 billion OMO offer, which absorbed excess liquidity and temporarily drove funding costs back toward 32.5%. Despite this, system liquidity closed the week with a positive balance of N287.76 billion, ensuring relatively lower borrowing costs.
Analysts at AIICO Capital expect further inflows of nearly N1.7 trillion from statutory revenue allocation, OMO maturities, and bond coupons to maintain downward pressure on short-term rates, barring unforeseen liquidity shocks.
