Interbank Rates Crash over Banks Excess Liquidity

Interbank rates plunged significantly as pressure on the money market continued to ease following a spike in inflows. On Thursday, liquidity balance in the financial system expanded above local banks funding requirements.

System liquidity remained positive and improved despite today’s foreign exchange (FX) settlement with funding rates falling significantly. Some analysts said the money market witnessed low outflow relating to primary market auction sales, especially OMO bills, in contrast to Sept experience.

Unlike in Oct, three Open Market Operation (OMO) auctions were held in response to significant inflows from FAAC and coupon payments last month. Hence, the Nigerian interbank borrowing rates (NIBOR) fell across all maturities, signaling improved liquidity in the banking system, Cowry Asset Limited said in an update.

The short term benchmark interest rates declined below 22% for the first time in weeks over relatively excess liquidity holdings by banks. In the absence of significant funding pressures, the Open Repo Rate (OPR) fell by 317 basis points to close at 21.14% in the money market today. 

Also, the Overnight Lending Rate (O/N), also dropped by 355 basis points to close at 21.45% while borrowing rate from standing lending facility of the central bank remained unchanged.

In its market update, CardinalStone Limited confirmed that money market rates slid as system liquidity was bolstered by operators’ activities at the Standard Deposit Facility (SDF) window. #Interbank Rates Crash over Banks Excess Liquidity Nigeria, Germany, EU unveil Programme to Boost Sustainable Energy Sector