Interbank Funding Rates Steady, Liquidity Surplus Hits N3.2T

Interbank Funding Rates Steady, Liquidity Surplus Hits N3.2T

Interbank funding rates steadied, supported by excess liquidity in the money market, which was in excess of N3.2 trillion at the close of the trading session last week.

The market recorded a bucket of inflows from short-term instruments that matured, further enhanced by deposit money banks increasing placement at the Central Bank window.

In a separate update, investment bankers reported that interbank system liquidity remained robust, closing the week at N3.20 trillion. This translates to an increase of N1.242 trillion after money market actions: auction sales and repayments.

The market recorded multiple inflows from matured short term instruments, keeping December conditions in surplus ahead of another OMO bills repayment in the new week.

The system recorded N772.93 billion inflows from OMO bills that matured and N805.88 billion treasury bills, which outweighed N709.62 billion auction settlement.

Banks placement at the CBN Standing Deposit Facility bolstered liquidity levels in the financial system – The surplus funds continue to keep the short term benchmark interest rates movement in check.

The Overnight and Repo rates- remained range bound, a development aided by adjustment to asymmetric corridor around monetary policy in November.

The CBN offered N700.00 billion worth of Nigerian Treasury bills last week but allotted N709.62 billion across the 91, 182 and 364-day papers.

For the new week, the market expects liquidity to remain relatively buoyant on the back of expected inflows of N512.00 billion from treasury bills, and N1.08 trillion in OMO bills repayment.

Despite the liquidity improvement, average funding rates held steady at 22.61%, as the OPR closed flat at 22.50%, while the overnight lending rate inched up slightly by 1bp week on week to 22.72%.

There is expectation that the average funding cost to in the money market will ease slightly in the new week, provided there is no funding activities.

In November, the Nigerian banking system’s liquidity displayed a generally ample profile, with system liquidity averaging N3.3 trillion, compared to N2.9 trillion in October.

Conditions were influenced by OMO and Treasury bills maturities, steady Deposit Money Banks (DMBs) placements at the CBN’ SDF window and periodic bond coupon inflows.

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