Benchmark Rates Swing as Banks Tap CBN Lending Window Amid Liquidity Squeeze
Short-term benchmark rates experienced fluctuations as Nigerian deposit money banks increased borrowings from the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF) due to tightened liquidity.
To cover daily funding gaps, some lenders returned to the apex bank’s lending window on Monday after a brief pause. In parallel, the CBN withdrew excess liquidity last week by selling Open Market Operation (OMO) bills and Treasury bills worth ₦2.3 trillion.
According to AIICO Capital Limited, system liquidity began the week in positive territory but weakened as aggregate balances fell by ₦436.38 billion. This led to a sharp rise in SLF borrowings, jumping to ₦186.3 billion from ₦25 billion in the prior period.
Despite reduced liquidity, funding costs eased slightly, with the Overnight Policy Rate (OPR) dipping by 8 basis points to 26.42%, while the Overnight (O/N) rate stayed at 27.00%. Analysts expect short-term rates to remain near current levels unless major funding events occur.
Cowry Asset Limited reported that interbank rates (NIBOR) rose across tenors due to sustained liquidity pressures. Overnight, 1-month, 3-month, and 6-month NIBOR increased by 5, 11, 9, and 5 basis points, respectively.
The Nigerian Interbank Treasury Bills True Yield (NITTY) curve also saw gains across most maturities, with the average secondary market yield climbing by 3 basis points to 17.88% amid strong investor interest.
