Market Rates Ease over Excess Liquidity in Banking System

Money market rates declined as a result of surplus liquidity in the financial system. The interbank market has been flooded with excess liquidity, and local deposit money banks have been having fun with the above-average treasury bill rate on placement at the Central Bank window.
CBN liquidity action slowed down, lifted the funding profile in the market, and kept the short-term interest rates behind 25%. Banks’ placements at the standing depot facility averaged ₦2.88 trillion, up from ₦2.02 trillion the previous week, TrustBanc Financial Group Limited said in a note.
Hence, the banking system closed the week with a ₦2.47 trillion surplus, a decline from an opening balance of ₦3.78 trillion. In the absence of funding pressures, average daily liquidity for October rose 9% to ₦2.96 trillion from ₦2.71 trillion in September.
Funding profile was also strengthened by FAAC inflows and other system credits that offset early week OMO settlement outflows. According to market report, inflows of ₦261.38 billion from bond coupon payments supported liquidity. A bond auction settlement totalling N313.77 billion midweek exerted mild pressure.
Despite brief contractions from OMO and Treasury bills auction outflows, overall funding conditions remained comfortable, keeping short-term interbank rates lower by an average of 14 bps.
Consequently, the Open Repo Rate (OPR) dipped by 4 bps to 24.50%, while the Overnight Rate (O/N) declined by 24 bps to close at 24.83% week on week.
Supported by expected coupon inflows of about ₦261 billion from the Apr-2029, Apr-2032, and Apr-2049 bonds, funding costs are anticipated to ease further in the coming week in absence of any funding activities Oando Fires Up, Gains 12% as Investors Bet on ‘Possibilities’