Money market rates softened last week even as significant outflows tied to Open Market Operations (OMO) settlements and Nigerian Treasury Bills (NTB) auctions weighed on liquidity, according to investment analysts.
The financial system began the week on a strong footing, with liquidity boosted by inflows from maturing bills. This lifted system liquidity to ₦4.68 trillion, supported largely by robust placements at the Standing Deposit Facility.
Banks continued to deposit excess funds with the Central Bank of Nigeria to bolster earnings amid a cautious lending environment. Commercial banks have increasingly favoured investment securities, with fair value positions on balance sheets now running into the trillions.
However, liquidity conditions tightened sharply midweek following aggressive sterilisation via OMO auctions, highlighting the authorities’ determination to curb excess liquidity. Interbank liquidity remained supported by deposit money banks’ lodgements with the apex bank, which totalled ₦2.08 trillion.
By week’s end, system liquidity had moderated to ₦2.16 trillion, reflecting mounting pressure compared with ₦4.32 trillion recorded in the previous week.
Liquidity dynamics were further influenced by expectations of additional debits, notably the ₦1.91 trillion raised at the NTB auction, set against ₦765.9 billion in NTB maturities and ₦550 billion in OMO maturities.
The net effect points to a deliberate tightening stance by the Central Bank of Nigeria, aimed at maintaining firm funding conditions. Despite the tighter liquidity backdrop, money market rates declined.
The overnight rate fell by 7 basis points week-on-week to 22.71 per cent, while the funding rate held steady at 22.50 per cent. NIBOR rates also edged lower across the curve, reflecting mixed market activity and intermittent inflows, according to Cowry Asset Limited.
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