Copyright bizwatchnigeria
Nigeria’s money-market interest rates declined this week following a substantial liquidity injection of N₦1.5 trillion from the Federation Account Allocation Committee (FAAC), which helped relieve funding pressure across the banking system. According to research by Cordros Capital Limited, the net long liquidity position rose to N₦2.05 trillion from N₦1.88 trillion a week earlier. The sizable FAAC disbursement, combined with coupon payments and other money-market flows, played a critical role in cushioning the financial system. Although the Central Bank of Nigeria absorbed N₦827 billion via an Open Market Operation (OMO) auction to manage excess cash, the overnight lending rate fell by 24 basis points to 24.83 %, while the open-repo rate slipped by 4 basis points to 24.50 %. These movements signal improved funding conditions at the short end. At the start of the week, the system liquidity opened at a net surplus of N₦956.71 billion — markedly lower than the N₦2.0 trillion recorded the prior week — largely attributed to increased borrowing via the CBN’s Standing Lending Facility (SLF), where deposit-money banks accessed over N₦960 billion to meet immediate obligations. Maturing Treasury Bills and FAAC inflows boosted liquidity as the week progressed, elevating system liquidity to N₦3.12 trillion by week’s end. Monitoring data from Cowry Asset Limited reports a modest 10 basis-point dip in the Nigerian Interbank Borrowing Rate (NIBOR) to 24.82 %. Meanwhile, the Nigerian Interbank Treasury Bills True Yield curve reflected marginal adjustments as investors priced in both tighter liquidity and higher return expectations. At the recent treasury-bills auction, the CBN offered N₦650 billion but allotted N₦391.6 billion across 91-day, 182-day and 364-day tenors amid strong demand. The 364-day instrument attracted N₦674.25 billion in subscriptions against a N₦450 billion offer, with an allotment of N₦316.56 billion at a stop rate of 16.14 %. The 182-day and 91-day tenors cleared at 15.50 % and 15.30 % respectively. In a parallel OMO auction earlier in the week, the 252-day bill drew N₦1.01 trillion in subscriptions and cleared at 19.84 %, while the 196-day paper closed at 19.50 %. In total the CBN allotted N₦827 billion, highlighting its willingness to satisfy strong market demand while maintaining a tight monetary stance. The large FAAC inflow thus acted as a timely shock absorber for the Nigerian banking system, easing short-term funding pressures and allowing rates to edge lower. For participants in money-market operations, the current environment offers a window of somewhat improved funding conditions — though structural constraints remain. Looking ahead, the key variables to watch include: central-bank mop-ups of excess liquidity, upcoming maturities of government paper, and potential shifts in FAAC disbursement patterns. Together, these will influence whether downward rate momentum persists or liquidity tightens once more.
