The short-term benchmark interest rate fell sharply on Monday as a major inflow from the Federation Account Allocation Committee (FAAC) boosted system liquidity. The injection of funds eased funding pressures across the market, with reduced reliance by deposit money banks on the Central Bank of Nigeria’s standing lending facility.
Interbank rates (NIBOR) opened the week lower across all maturities. The overnight rate declined by 2.04%, while the 1-month, 3-month, and 6-month tenors dropped by 1.75%, 1.88%, and 1.79%, respectively.
According to Cowry Asset Limited, the sharp decline in money market rates was driven by the N2 trillion FAAC allocation, which significantly lifted market liquidity. The Open Repo Rate (OPR) fell 240 basis points to 26.50%, while the overnight rate slid 223 basis points to 26.92%.
Elsewhere, Nigerian Interbank Treasury Bills True Yield posted a mixed performance, with the 1-month and 6-month tenors inching up by 3 and 4 basis points, respectively.
Liquidity conditions had improved earlier, starting the previous week at N1.02 trillion after a deficit of -N94.56 billion. However, by week’s end, liquidity contracted to -N609.43 billion due to a large CBN OMO auction that absorbed excess cash.
Reflecting these shifts, banks’ placements at the Standing Deposit Facility fell from N923.68 billion to N539.12 billion, while utilisation of the Standing Lending Facility rose from N179.08 billion to N821.50 billion. Despite the late tightening, average system liquidity improved to N366.94 billion compared with N62.94 billion a week earlier.
