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IN spite of the increased aggressive liquidity mop up by the Central Bank of Nigeria, CBN, cost of funds is expected to fall further this week in response to inflow of N1.36 trillion into the interbank money market. Last week, cost of funds fell marginally in defiance of the liquidity mop up efforts of the CBN.
The apex bank had conducted Open Market Operation, OMO, treasury bills, TBs, auctions from Monday to Thursday, including a special auction on Thursday, mopping up N764.74 billion in the process. The impact of the huge outflow was, however, moderated by inflow of N497.82 billion from matured OMO treasury bills, leading to 250 basis points decline in average short term interest rates.
Data from FMDQ showed that interest rate on Collateralised (Open Buy back, OBB) lending fell by 290 bpts to 21.67 percent last week from 24.57 percent the previous week. Similarly, interest rate on Overnight lending fell by 213 bpts to 25.08 percent from 27.21 percent the previous week.
This trend will likely be sustained this week in view of N1.36 trillion inflow into the market. The inflow comprises of maturing TBs worth N551.36 million and the N812.76 billion allocated to the three tiers of government last week by the Federation Accounts Allocation Committee (FAAC).
These inflows according to analysts at Cowry Assets Management Limited, is expected to boost financial system liquidity and result in a corresponding downward trend in the Nigerian Interbank Offered Rates (NIBOR).
Analysts at Zedcrest Capital however projected a more aggressive liquidity mop up this week by the CBN which could forestall further moderation in cost of funds.
“In the coming week, the CBN will likely resume its daily OMO auction offering to manage expected inflows from FAAC payments and OMO maturities. Due to the holidays and reduced trading sessions, we expect the CBN to be aggressive in the volumes on offer as it keeps a tight lid on system liquidity.”
The apex bank had conducted Open Market Operation, OMO, treasury bills, TBs, auctions from Monday to Thursday, including a special auction on Thursday, mopping up N764.74 billion in the process. The impact of the huge outflow was, however, moderated by inflow of N497.82 billion from matured OMO treasury bills, leading to 250 basis points decline in average short term interest rates.
Data from FMDQ showed that interest rate on Collateralised (Open Buy back, OBB) lending fell by 290 bpts to 21.67 percent last week from 24.57 percent the previous week. Similarly, interest rate on Overnight lending fell by 213 bpts to 25.08 percent from 27.21 percent the previous week.
This trend will likely be sustained this week in view of N1.36 trillion inflow into the market. The inflow comprises of maturing TBs worth N551.36 million and the N812.76 billion allocated to the three tiers of government last week by the Federation Accounts Allocation Committee (FAAC).
These inflows according to analysts at Cowry Assets Management Limited, is expected to boost financial system liquidity and result in a corresponding downward trend in the Nigerian Interbank Offered Rates (NIBOR).
Analysts at Zedcrest Capital however projected a more aggressive liquidity mop up this week by the CBN which could forestall further moderation in cost of funds.
“In the coming week, the CBN will likely resume its daily OMO auction offering to manage expected inflows from FAAC payments and OMO maturities. Due to the holidays and reduced trading sessions, we expect the CBN to be aggressive in the volumes on offer as it keeps a tight lid on system liquidity.”
