Short-term interest rates in Nigeria’s money market have surged into double digits amid persistent liquidity challenges facing the financial system.
Interbank lending rates continue to hover at elevated levels, a reflection of the ongoing struggle by commercial banks and other financial entities to secure sufficient funding.
This scarcity has driven many deposit money banks to rely on the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF) to meet their liquidity needs.
The current liquidity squeeze in the market has intensified, even in the absence of major auctions or inflows from maturing treasury instruments. Instead, the recent AMCON levy deductions and settlements from the CBN’s foreign exchange interventions have further drained available funds, forcing financial institutions to jostle for cash at SLF rates.
Earlier this week, system liquidity improved marginally, with the deficit narrowing to ₦499.69 billion from ₦659.92 billion, thanks to coupon payments on Federal Government of Nigeria (FGN) bonds.
Nevertheless, the ₦90.59 billion in bond coupon inflows proved insufficient to ease the cash crunch, as interbank rates remained fixed at 32.5%. The Nigerian Interbank Offer Rate (NIBOR) displayed a mixed trend—overnight and 1-month tenors edged up by 4 and 22 basis points, respectively, while the 3-month and 6-month rates each dipped by 7 basis points, according to Cowry Asset Management.
In the broader money market, yields climbed as well. The Open Buy Back (OBB) rate rose 9 basis points to 32.42%, while the overnight lending rate increased by 16 basis points to settle at 32.83%, as reported by various analysts.
AIICO Capital Limited noted that interbank rates are likely to remain around 32.5% in the short term, until fresh coupon payments and statutory revenue allocations improve liquidity and potentially drive rates down toward 26.5%.
