Bank Liquidity Surge Drives Interbank Rate Relief
A surge in system liquidity has led to a sharp drop in interbank rates, creating much-needed relief for banks in Nigeria’s money market. On Thursday, financial system liquidity rose by 31%, reaching a robust surplus balance of ₦466.59 billion and easing pressures in the funding environment.
This rise in liquidity follows substantial inflows from the Federation Account Allocation Committee (FAAC) disbursements and a recent Cash Reserve Ratio (CRR) refund of N154 billion. As a result, the banking sector’s funding rates have witnessed notable declines, with short-term benchmark rates falling below 22% for the first time in recent weeks.
With limited outflows and fewer Open Market Operations (OMO) in October compared to the previous month, banks have enjoyed greater ease in managing their daily funding needs. Cowry Asset Limited reported a broad-based drop in Nigerian Interbank Offered Rates (NIBOR), signalling a well-supported banking system.
The Open Repo Rate (OPR) decreased by 317 basis points, closing at 21.14%, while the overnight lending rate fell by 355 basis points to 21.45%. According to CardinalStone Limited, “These drops reflect the substantial liquidity in the banking system, with support from the central bank’s Standard Deposit Facility (SDF) window helping to stabilise rates.”
TrustBanc Financial Group noted that last week’s easing of liquidity pressures marked a turning point, as banks entered the week with a surplus balance of ₦183.98 billion. Analysts foresee sustained stability in money market rates if the current liquidity trends continue, indicating a promising outlook for financial sector stability in the coming weeks.
This liquidity boost reflects the central bank’s effective management and positions the financial system favourably, offering stability amidst wider economic challenges. CBN Maintains Steady FX Support to Stabilise Naira Value
