Short-term benchmark lending rates eased last week as Nigeria’s financial system recorded strong liquidity, bolstered by inflows from infrastructure funds and OMO maturities, despite aggressive mop-up operations by the Central Bank of Nigeria (CBN).
Market data showed that liquidity conditions stayed positive, keeping rates relatively stable throughout the trading sessions. The interbank market opened with ₦1.39 trillion in credit and ended higher at ₦2.22 trillion by the final trading day.
Analysts attributed the liquidity boost to ₦459 billion in OMO maturities, inflows from Remita, approximately ₦100 billion state infrastructure funds, and a 13% derivatives allocation to oil-producing states, according to a market note by AIICO Capital Limited.
To curtail excess cash, the CBN intervened with a ₦600 billion OMO auction, which attracted strong demand and saw allotments worth ₦620.65 billion. The apex bank also effected a ₦251.28 billion net CRR debit and executed foreign exchange settlements during the week.
Despite these interventions, liquidity remained ample. Interbank rates stayed anchored at the lower band, with the Open Repo Rate (OPR) steady at 26.50% while the Overnight Lending Rate edged up slightly by five basis points to 27.00%.
Meanwhile, the Nigerian Interbank Borrowing Rate (NIBOR) jumped sharply by 14 percentage points to 26.92% as commercial banks actively used the CBN’s standing deposit facility.
In the secondary market, Nigerian Treasury Bill yields softened significantly. The one-month, three-month, and twelve-month NITTY fell by 19bps, 48bps, and 14bps, respectively, while the six-month tenor gained 3bps.
This downward shift extended to the Treasury bills market, where average yields plunged by 692bps to 18.57% due to strong buy-side demand.
Looking ahead, analysts at Cowry Asset Management expect funding rates to remain slightly sticky as system liquidity stays elevated. AIICO Capital projected that this week’s ₦184.75 billion Treasury bills maturity would further strengthen liquidity, though the CBN could deploy another OMO auction to absorb surplus funds.
