Activity in the money market stayed firmly in positive territory at the end of week, with liquidity levels comfortably buoyant.
Financial system liquidity opened the week with a strong net surplus of N2.12 trillion, supported by elevated activity in the CBN’s Standing Deposit Facility and repayments of about N259 billion from the primary market.
Liquidity was further bolstered by N254.90 billion in OMO bill repayments and over N460 billion in additional primary market repayments, allowing the week to close with an even stronger surplus of N4.02 trillion.
This came despite the passage of CRR debits on a few banks by regulators. The accommodative stance announced at the MPC meeting, which cut the MPR to 27% while lowering the CRR for deposit money banks to 45% and introducing a higher 75% CRR on non-TSA deposits, provided additional tailwinds for liquidity conditions.
Reflecting these dynamics, the Nigerian Interbank Offered Rate (NIBOR) crashed across all maturity gauges as the system absorbed the impact of maturing OMO bills and higher cash balances.
The Overnight NIBOR fell sharply by 2.06 percentage points week-on-week to settle at 24.78%, underpinned by the liquidity boost from CBN crediting of banks in line with the revised CRR framework.
Similarly, the 1-month, 3-month, and 6-month NIBOR rates declined by 158 basis points (bps), 139bps, and 137bps respectively, closing at 25.83%, 26.79%, and 27.59%.
Benchmark funding rates also reflected the ample liquidity, as the OPR and OVN fell to 24.50% and 24.88%, representing declines of 2% and 2.07% week-on-week.
On the other hand, the Nigerian Treasury Bills Market Index (NITTY) presented a mixed performance. While the 12-month tenor eased by 17bps to 19.10%, shorter and mid-term tenors climbed higher, reflecting investors’ demand for higher yields. The 1-month, 3-month, and 6-month NITTY rates advanced by 22bps, 64bps, and 108bps respectively.
In the secondary market for Treasury bills, strong buying interest persisted across the short, mid, and long ends of the curve, dragging the average market yield down by 49bps to 17.99% at the close of the week.
Looking ahead, market expert envisaged sentiment to remain broadly positive, buoyed by anticipated OMO bill maturities worth N450 billion, which should keep system liquidity elevated.
According to investment analysts at Cowry Assets, “Investors are also likely to continue repositioning portfolios in response to the recent policy rate cut. That said, the upcoming FGN bond issuance may serve as a counterbalance, mopping up part of the excess liquidity and keeping funding rates tilted toward the upper band.
Sharing similar sentiment, Cordros analysts expected that barring liquidity mop-up operations by the CBN, N731.14 billion upcoming inflows from OMO maturities and another N164.29 billion FGN bond coupon payments should sustain the system’s robust liquidity, likely exerting further downward pressure on the OVN rate.
