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Nigeria: Interbank Rates Drop as Banking System Liquidity Deficit Eases

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Interbank Rates Drop as Banking System Liquidity Deficit Eases
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The liquidity deficit in Nigeria’s banking system moderated significantly, closing at ₦190.50 billion on Thursday, down from ₦249.3 billion reported earlier in the week.

This improvement, driven by inflows that eased liquidity pressures, impacted short-term interest rate benchmarks. According to investment firms, interbank rates dropped as the liquidity deficit eased.

During the week, the banking system experienced tight liquidity conditions, with the deficit peaking at ₦389.7 billion due to high funding demands. However, Thursday’s 24% improvement signaled a partial recovery.

Despite the moderation, funding rates remained elevated as banks continued to rely on the Central Bank of Nigeria’s (CBN) Standing Lending Facility to meet liquidity needs.

Data from the FMDQ platform showed a decline in key rates: the open repo rate fell by 4 basis points to 32.21%, while the overnight lending rate dropped by 3 basis points to 32.64%. These reductions reflect the ongoing liquidity constraints in the financial system.

Meanwhile, the Nigerian Interbank Offered Rate (NIBOR) eased, supported by the increased system liquidity. Analysts predict funding rates will hover near current levels unless a significant liquidity boost occurs.

In the Treasury Bills market, mixed trends emerged. The Nigerian Interbank Treasury Bills True Yield (NITTY) recorded slight movements, while positive momentum in the secondary market led to a 0.06% decline in the average T-bill yield, settling at 25.18%.

The easing interbank rates underscore the impact of moderated liquidity pressures but highlight the persistent tightness in Nigeria’s financial system.

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