By 
Interbank rates in Nigeria’s money market have dropped following liquidity injections from the Federal Account Allocation Committee (FAAC), which eased pressures on the financial system.
According to a report from CardinalStone Limited, the system’s liquidity was bolstered by FAAC inflows, helping to offset the effects of bond settlement outflows. Despite this boost, overall liquidity remained in negative territory.
Money market rates had previously been elevated, driven by tight liquidity conditions and the Central Bank of Nigeria’s (CBN) continued monetary policy tightening. The high rates have had a significant impact on both banks’ money market deposits and the performance of mutual funds, as they influence the cost of borrowing and investments.
Banks have been relying on the CBN’s Standing Lending Facility, borrowing at a steep 31.75%, due to the ongoing liquidity constraints. Analysts note that while the high borrowing costs affect the operations of local lenders, banks with a large deposit base are better positioned to manage the cost of funds.
The recent liquidity outflow, attributed to heavy demand at the Debt Management Office (DMO) bond auction, added to the pressure on the financial system. However, FAAC inflows provided a much-needed cushion, easing the strain on market liquidity.
Data from the FMDQ platform revealed that key interbank rates—Open Buy Back (OPR) and Overnight (O/N)—fell by 195 and 183 basis points, respectively, settling at 30.41% and 30.78%.
Analysts from Cowry Asset Management also reported a broad decline in the Nigerian Interbank Offered Rate (NIBOR) across most maturities, although the Overnight NIBOR saw a marginal rise of 0.09%, reaching 32.47%.
In a related development, Nigerian Interbank Treasury Bills True Yield (NITTY) experienced upward movement across most maturities, while the average yield in the secondary market for Treasury Bills moderated slightly by 0.04%, ending at 24.11%.
This liquidity boost from FAAC is expected to continue providing some relief to the financial system in the short term, but market watchers remain cautious as external factors, including monetary policy and bond market dynamics, will continue to shape the direction of interbank rates.
Comments