Nigeria’s interbank market witnessed heightened activity for the week that ended yesterday, Friday, August 22, as deposit money banks ramped up borrowings at the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF), even as the overnight (OVN) lending rate eased on the back of robust liquidity injections.
The Standing Lending Facility (SLF) is the window through which money deposit banks access credit from the apex bank at critical moments, and usually pay back within 48 hours.
Data from the money market show that average daily borrowings through the SLF window surged to ₦360.19 billion, significantly higher than the ₦294.80 billion recorded in the preceding week.
The sharp uptick underscores persisting funding pressures in the banking system despite improved liquidity buffers, which the banking system is believed to have with the CBN.
The OVN rate fell by 325 basis points week-on-week to 29.2%, supported by sizeable inflows from maturing Open Market Operations (OMO) bills amounting to ₦854.46 billion. This lifted overall system liquidity to a net long position of ₦159.40 billion, compared with ₦62.94 billion in the prior week. Analysts note that, in the absence of fresh liquidity-tightening measures by the apex bank, upcoming inflows from FGN bond coupon payments (₦113.62 billion) and additional OMO maturities (₦758.00 billion) could further ease interbank funding conditions, placing downward pressure on short-term rates.
However, yields across the Treasury bills market remained under pressure. The average yield expanded by 59bps to 22.0%, with the Nigerian Treasury Bills (NTB) segment advancing by 42bps to 18.4% and the OMO segment spiking by 98bps to 25.5%. At the midweek NTB auction, the Debt Management Office (DMO) offered ₦230.00 billion but attracted subscriptions of ₦396.42 billion, reflecting improved demand. Ultimately, the DMO allotted ₦303.69 billion, with stop rates firming at 15.35% (91-day), 15.50% (182-day), and 17.44% (364-day).
The OMO market saw an even stronger appetite. The CBN offered ₦600.00 billion but received ₦1.02 trillion in subscriptions, leading to an allotment of N897.20 billion at sharply higher stop rates of 25.50% (89-day) and 25.99% (124-day). Market watchers interpret the move as a deliberate effort by the central bank to aggressively sterilise excess liquidity and maintain control over inflationary pressures.
Meanwhile, the FGN bond market closed the week bearish, with average yields inching up by 8bps to 16.7%. Selloffs were concentrated in the mid- to long-tenor maturities, reflecting investor reaction to the elevated NTB auction rates.
Looking ahead, analysts expect liquidity-driven demand for government securities to soften yields in the near term, even as the CBN maintains a delicate balancing act between market stability and inflation control.
