MONEY MARKET RATES FALL AS BANKING LIQUIDITY RISES

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Money market rates declined as liquidity in Nigeria’s banking system increased to N7.45tn, putting downward pressure on short-term funding costs.

The development followed the Central Bank of Nigeria’s decision to cut its Monetary Policy Rate by 350 basis points to 23 per cent and reduce the Standing Deposit Facility floor to 20 per cent.

According to AIICO Capital, the overnight policy rate fell by one percentage point to 21 per cent, while the overnight lending rate declined by 51 basis points to 21.76 per cent. The average Treasury bill rate also dropped to 18.38 per cent.

Banking system liquidity increased by 7.92 per cent from N6.91tn to N7.45tn, marking the fourth consecutive weekly rise. The increase was supported by N2.27tn released through matured Open Market Operation bills and higher utilisation of the Standing Deposit Facility.

The Nigerian Interbank Offered Rate overnight rate fell by 123 basis points to 20.93 per cent, while the Open Repo rate declined by 100 basis points to 21 per cent.

Treasury bills also attracted strong demand in the secondary market, resulting in lower yields across different maturities.

AIICO Capital said short-term rates could remain under downward pressure if the liquidity surplus persists, although the size of future CBN OMO auctions will influence how quickly excess funds are absorbed from the financial system.