NIGERIA’S banking sector deposited a total of N4.15 trillion with the Central Bank of Nigeria (CBN) through the Standing Deposit Facility (SDF) during the week, highlighting persistent excess liquidity in the financial system, despite ongoing monetary tightening measures.
Market data showed that deposits at the SDF surged by nearly 60 percent from N2.60 trillion recorded in the previous week. In contrast, borrowing through the CBN’s Standing Lending Facility (SLF) remained marginal at N36.10 billion, indicating that banks faced little pressure in meeting short-term funding needs.
The liquidity glut was largely driven by substantial inflows from maturing Open Market Operation (OMO) bills valued at N2.21 trillion and Treasury bills maturities amounting to N269.36 billion. Although the settlement of N1.06 trillion from the Debt Management Office’s Treasury bills auction moderated system liquidity towards the end of the week, banking system balances remained firmly positive, closing at N4.32 trillion.
The improved liquidity environment pushed down interbank funding rates across key tenors. Overnight Nigerian Interbank Offered Rate (NIBOR) declined by 10 basis points to 22.19 percent while the one-month, three-month and six-month rates fell by 24 basis points, 38 basis points and 39 basis points to 22.35 percent, 22.56 percent and 22.83 percent, respectively.
Analysts said the decline in interbank rates reflected reduced demand for short-term funds among banks amid ample liquidity conditions.
In the fixed-income market, the Nigerian Treasury Bills True Yield (NITTY) curve recorded mixed movements. While yields on the one-month and 12-month instruments rose slightly to 16.46 percent and 21.05 percent, respectively, yields on the three-month and six-month tenors declined to 16.78 percent and 18.01 percent, reflecting stronger investor demand for medium-term government securities.
The secondary Treasury bills market also maintained a bullish tone as investors continued to seek attractive sovereign instruments. Demand across short-, medium- and long-dated maturities drove the average Treasury bill yield down by 22 basis points to 18.51 percent from 18.73 percent in the previous week.
The latest figures extend a trend seen in recent weeks. In the third week of June, excess liquidity in the banking system surged by 37 percent, with banks’ placements at the CBN’s deposit window rising above N5 trillion as lenders parked surplus funds amid limited lending opportunities and the absence of aggressive liquidity mop-up operations by the apex bank.
