A severe liquidity crunch has gripped Nigeria’s banking system, pushing short-term benchmark interest rates above 32% as the system grapples with a staggering ₦1.84 trillion deficit. This liquidity crisis, exacerbated by the recent Nigerian Treasury bills settlement, is placing significant pressure on the financial sector.
The banking system experienced a net outflow of ₦503.92 billion, primarily due to treasury bill settlements, while only receiving ₦254.82 billion from FGN bond coupon payments. This imbalance has resulted in the substantial liquidity deficit, according to reports from Cordros Capital Limited and TrustBanc Financial Group Limited.
Despite approximately ₦255 billion in inflows from FGN bonds coupon payments, the open report rate remained stubbornly high, hovering near 33%. The Nigerian Interbank Offered Rate (NIBOR) showed mixed results, with most tenors increasing except for the overnight NIBOR, which slightly decreased by 0.07% to 32.71%, as noted by Cowry Asset Limited.
Data from the FMDQ platform indicates that interbank funding rates remained steady, with the Open Repo (OPR) and Overnight (O/N) rates unchanged at 32.40% and 32.90%, respectively.
Key Observations:
- The banking system closed with a ₦1.84 trillion liquidity deficit.
- Short-term interest rates remain elevated, exceeding 32%.
- Treasury bill settlements and insufficient inflows are driving the liquidity crunch.
- Market analysts from TrustBanc predict that with no significant inflows expected, the liquidity squeeze is likely to persist, keeping interbank rates elevated above 30%.
Market analysts anticipate that the current liquidity pressures will continue to drive interest rates upwards in the coming days, potentially impacting borrowing costs and overall economic activity. The financial sector is closely watching for any measures that the Central Bank of Nigeria might take to alleviate the liquidity crisis.
