Interbank rates diverge as market struggles with liquidity

Interbank rates diverged in the money market as a weak funding profile in the financial system heated up rates and pricing.

Banks are requiring higher rates on their free funds as local lenders patronized the Central Bank of Nigeria (CBN) for liquidity backup.

Nigerian interbank borrowing rate (NIBOR) fell across most maturities, Cowry Asset Limited said in a note. This happened as local banks boosted liquidity with funds accessed from the CBN Standing Lending Facility (SLF).

Data from the FMDQ platform confirmed that key money market rates such as the Open Repo Rate (OPR) increased by 0.11% to close at 32.39%.

Investment firm said in their separate market updates that the Overnight Lending Rate (O/N) remained unchanged at 32.81%

System liquidity decreased further, with around ₦910 billion exposed to the CBN’s SLF window on Tuesday, AIICO Capital Limited said.

The overnight lending rate remained unchanged at 32.8% as the inflow from OMO maturities worth N54.45 billion was not sufficient to saturate the system liquidity.

In September, market liquidity fluctuated significantly, opening in a credit of ₦579.34 billion and closing in a debit of ₦530.81 billion mid-month before recovering to ₦785.85 billion by the end of the month, AIICO Capital Limited said.

In its report, analysts noted that slowdown in liquidity balance in the financial system were driven by OMO auction settlements, Remita outflows, TSA debits, and NNPC obligations, which caused rates to spike to as high as 32.25%.

On the other hand, FAAC disbursements, FGN bond coupon payments, and other inflows provided some relief, pushing rates down to 19% and 25.75% at various points

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