Money Market Rates Steady, Banks Boost Deposit at SDF to N3.5trn

The money market remained flooded with excess liquidity on Tuesday amidst a tight appetite for commercial lending. Cash-rich big banks are parking funds at the Apex Bank at the standard deposit facility rate of 24.50%, which is higher than the average return on Nigerian Treasury bills.

The monetary authority has been mopping up excess liquidity from expired short-term investment instruments, including bulky inflows from FAAC.

To keep liquidity at equilibrium, the Central Bank floated its open market operations actions where N1.2 trillion worth of OMO bills were offered for subscription.

Despite the significant liquidity mop-up last week, the money market remained flooded, forcing banks to park cash at the deposit facility window and earn above the treasury bill rate.  

On Tuesday, the short-term benchmark interest rates were steadied as sufficient liquidity in the money market kept funding costs in check.

The market liquidity opened with a surplus balance of ₦4.8 trillion, reflecting an increase of ₦930.6 billion from the previous level, the investment firm said. The improvement was mainly driven by an inflow of ₦1.1 trillion from OMO maturity, according to AIICO Capital Limited.

In the absence of significant pressures in the financial system, deposit money banks (DMBs) maintained strong participation in the Central Bank of Nigeria (CBN) Standing Deposit Facility (SDF) window.

Hence, the commercial banks’ placement at the SDF window expanded to ₦3.5 trillion. Despite excess flows, money market funding costs remained unchanged, as both the overnight lending rate and open purchase rate held at 24.86% and 24.50%, respectively.

“We anticipate funding costs to remain at a similar level, barring any funding activity,” AIICO Capital said in its market update.

The Nigerian Treasury bills’ average yield fell sharply by 141 bps to 15.94%, reflecting strong and persistent investor appetite in the fixed-income space. #Money Market Rates Steady, Banks Boost Deposit at SDF to N3.5trn Oando Sinks Below N500bn Amidst Petrol Business Threat

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