Money Market Rates Dip as Liquidity Stays Strong Despite OMO Outflows
Money market rates declined as financial system liquidity remained robust despite significant outflows from Open Market Operations (OMO) bills sold to deposit money banks and foreign portfolio investors at the Central Bank’s primary market auction on Friday.
The strong liquidity position in the money market was supported by multiple inflows, including Central Bank of Nigeria (CBN) foreign exchange swaps, Federal Account Allocation Committee (FAAC) disbursements of approximately ₦300 billion, Remita receipts, and Federal Government of Nigeria (FGN) bond coupon payments totaling ₦229.39 billion, complementing existing balances.
Financial analysts noted that several Nigerian banks placed over ₦5 trillion into the Central Bank’s standing deposit facility, reflecting minimal funding pressures within the system.
These combined inflows exceeded foreign exchange settlement and cash reserve ratio (CRR) deductions in the money market, maintaining the average liquidity balance at a ₦1.18 trillion net long position ahead of anticipated new inflows in the coming week.
According to AIICO Capital Limited’s market report, interbank liquidity began at ₦368.21 billion before improving by ₦1.418 trillion to finish at ₦1.785 trillion.
Analysts observed that money market rates remained steady around 26.5%, despite a ₦714.38 billion Nigerian Treasury Bills settlement and a substantial ₦1.008 trillion OMO auction debit occurring on Friday.
The Overnight Policy Rate (OPR) and Overnight (O/N) rate closed at 26.50% and 26.88%, respectively, representing decreases of 5.10% and 5.17% week-on-week, reflecting the absence of major funding constraints.
AIICO Capital Limited’s analysts expect system liquidity to continue at comfortable levels, with ₦259.69 billion in bond coupon inflows offsetting auction settlements, likely keeping rates near current levels unless unexpected funding disruptions emerge.
The banking system benefited from inflows via FGN bond coupon disbursements and contractor payments during the previous week. Some market observers anticipate that slightly reduced liquidity levels may lead to a modest increase in short-term benchmark interest rates.
