Nigeria’s overnight lending rate has climbed to 22.20 per cent as tighter liquidity conditions in the banking system push up short-term funding costs. The rate increased by two basis points, while the Open Buyback (OBB) rate remained unchanged at 22 per cent, following the settlement of the Central Bank of Nigeria’s midweek treasury bills auction.
Data from Herwood Securities Limited showed that system liquidity opened at a N3.66tn credit balance, down significantly from the previous session’s N4.61tn. The decline reflected the settlement of government securities purchased by banks and other investors, which temporarily locked up funds that could otherwise have been available for interbank transactions.
Liquidity has also come under pressure from the CBN’s aggressive sterilisation operations. Earlier in the week, the apex bank sold N2.888tn in Open Market Operations (OMO) bills as part of efforts to mop up excess cash from the financial system. Despite the sizeable withdrawal, however, the banking sector remained in surplus, indicating that financial institutions still have considerable liquidity buffers.
The pressure could ease in the coming days, with N734.81bn worth of treasury bills expected to mature and return funds to the banking system. The inflow is expected to cushion the recent liquidity drain and reduce the likelihood of a sharp rise in short-term borrowing costs.
For now, market participants expect the overnight and OBB rates to remain broadly stable around their current levels, provided the CBN does not introduce another major liquidity withdrawal. The latest movement highlights how closely money-market rates are responding to the central bank’s liquidity-management strategy as it seeks to balance monetary tightening with stability across the financial system.
source: punch
