LIQUIDITY TIGHTENING PUSHES OVERNIGHT RATE HIGHER

Nigeria’s overnight lending rate rose to 22.20 per cent as tighter liquidity conditions in the banking system followed recent Central Bank of Nigeria Treasury Bills transactions.

The overnight rate increased by two basis points from its previous level, while the open buyback rate remained unchanged at 22 per cent. The movement reflects pressure on available cash in the financial system as banks adjusted their positions after the recent transactions.

Earlier in the week, liquidity in the banking system stood at about N4.61tn, supporting strong demand for Treasury Bills as banks sought to invest excess funds in short-term government securities.

The liquidity tightening could push up short-term funding costs for banks if cash conditions remain constrained.

However, market conditions are expected to ease as N734.81bn worth of Treasury Bills mature. The maturity will return funds to the banking system and could provide some relief from the recent liquidity squeeze.

Market participants will be watching the movement closely as banks adjust to changing liquidity conditions and monetary policy operations.

The development also highlights the effect of government securities transactions on money-market rates and the availability of funds within Nigeria’s banking system.