Share this article

With liquidity stabilizing in Nigeria’s financial system, money market rates saw further declines as banks’ borrowing from the Central Bank of Nigeria’s (CBN) Standing Lending Facility eased. This shift comes as interbank rates adjusted lower in response to improved liquidity levels.

Following the CBN’s recent decision to lift the suspension on Standing Lending Facility access in September, the lending rate was raised to 31.75%, aligning with current monetary policy adjustments. This change has impacted money pricing significantly, as banks anticipate higher funding costs linked to parallel increases in deposit rates across the money market.

Midweek data showed that short-term interest rates continued to decrease due to reduced funding pressure, reflecting the stability in the market. Funding rates further dropped after inflows from the Federation Account Allocation Committee (FAAC), federal government bond coupon payments, and maturing Open Market Operations (OMO) bills improved overall liquidity levels in the financial system.

Despite a temporary shortfall of N837.3 billion in liquidity as of Friday due to banks’ substantial borrowings from the CBN’s facility, the Nigerian Interbank Offered Rate (NIBOR) still rose across tenors, signaling some constraints in liquidity. However, the Open Repo Rate (OPR) and Overnight Lending Rate (O/N) both fell by 1.68% and 1.95%, settling at 24.85% and 25.00%, respectively, down from over 32% the previous week amid liquidity pressures.

Looking ahead, analysts expect interbank rates to remain relatively steady, assuming no significant shifts in market conditions.

Share this article