Liquidity in Nigeria’s financial system fell by N930 billion on Thursday, pushing the overnight lending rate higher as the impact of the Central Bank of Nigeria’s (CBN) Treasury Bills auction tightened money-market conditions.
Market data showed that financial system liquidity opened the day at a credit balance of N3.66 trillion, down from N4.61 trillion recorded at the close of trading on Wednesday.
The N930 billion decline was attributed largely to the settlement of the Treasury Bills auction.
The tightening in liquidity was reflected in the overnight rate, which increased by two basis points to 22.20 per cent.
The Open Buyback (OBB) rate, however, remained unchanged at 22 per cent, serving as the floor for short-term funding rates.
The latest movement followed the CBN’s aggressive liquidity-management operations, including N2.888 trillion in Open Market Operations (OMO) bills sold earlier in the week.
Despite the decline, the banking system remained in surplus, indicating that banks still had substantial funds available for short-term transactions.
Analysts said liquidity conditions could receive some relief from expected inflows of N734.81 billion from matured Treasury Bills.
The anticipated inflows are expected to moderate pressure on short-term funding rates and help keep money-market conditions relatively stable.
The development comes as the CBN continues to use open-market operations and other monetary-policy instruments to manage excess liquidity and keep short-term interest rates around its desired operating range.
The CBN’s Monetary Policy Committee has retained the Monetary Policy Rate at 26.5 per cent.
