Liquidity: Interbank Rates Crash despite FX Auction Settlement

Liquidity: Interbank Rates Crash despite FX Auction Settlement

Interbank rates declined sharply despite huge outflow relating to FX auction sales to authorised deposit money banks last week. Money market rates have steadied above 32% over the past weeks due to the deficit liquidity position.

Some banks have been borrowing at the central Bank of Nigeria (CBN) standing lending facility (SLF) to augment liquidity balance.

Similar to money market rates which have been at double digits high, the Apex Bank had in Sept repriced SLF rate to 31.75% following monetary policy rate adjustments. According to data from the FMDQ platform, money market rates declined below 28% apiece as liquidity balance in the financial system surged.

Reports showed that system liquidity improved further after FAAC inflows altered liquidity position from deficits to positive balance. On Monday, the financial market also registered additional inflows from the FGN Bond coupon amounting to ₦259.35 billion.

However, rates are still hovering around 27% due to the settlement related to the CBN’s foreign exchange intervention.  Nigerian interbank borrowing rate (NIBOR) showed mixed trends across various maturities, Cowry Asset Limited said.

The Overnight NIBOR and 1-month tenor fell by 0.25% and 0.19%, settling at 27.88% and 27.06%, respectively, reflecting increased liquidity within the banking system.

Key short term benchmark interest rates including the Open Repo Rate (OPR) and the Overnight Lending Rate (O/N), decreased by 2.46% and 2.41%, closing at 27.32% and 27.73%, respectively.

Analysts said they anticipate an improvement in system liquidity on Tuesday as markets expect OMO bill maturity inflows to hit the system. #Liquidity Interbank Rates Crash despite FX Auction Settlement  Naira Rises against US Dollar Ahead of Sept. FX Auction