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Money market rates, specifically the overnight lending rate and open repo rate, declined this week, supported by inflows from the Federal Accounts Allocation Committee (FAAC) into the financial system.
The liquidity balance saw a notable boost, increasing by ₦1.02 trillion — shifting from a debit of ₦837.29 billion to a credit of ₦183.98 billion, as reported by AIICO Capital Limited. This improvement is primarily attributed to FAAC disbursements totaling ₦874 billion, with an additional boost from net cash reserve ratio maintenance credit amounting to ₦154 billion, according to insights from Cordros Capital Limited.
Despite this, certain factors kept interest rates elevated during the week. Debits from the Federal Government bond auction, FX market interventions by the Central Bank of Nigeria (CBN), and CRR debits collectively raised rates above 32%, noted AIICO Capital Limited. Last week’s FGN bonds debits, amounting to ₦289.60 billion, reduced liquidity in the system, though levels later rose due to signature bonuses and cash reserve credits, easing money market rates by week’s end.
Data from the FMDQ platform showed a decrease in the Overnight Policy Rate by 2.55% to 29.78%, while the Overnight Rate fell 2.42% to 30.14% week-on-week, in the absence of significant funding pressures.
“We expect that rates will moderate due to increased liquidity from expected inflows from FGN bond coupons and OMO maturities unless offset by CRR debits, OMO auctions, or FX interventions,” AIICO Capital Limited stated in its market update.
Cordros Capital Limited also projected a further boost to system liquidity in the coming week, driven by OMO maturities of ₦379.20 billion and FGN bond coupon inflows of ₦238.90 billion, barring any substantial liquidity management moves by the CBN.
In parallel, the Nigerian Interbank Borrowing Rate (NIBOR) fell by 3.81%, closing at 28.13%, reflecting enhanced liquidity in the banking sector, according to Cowry Asset Limited.
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