NIBOR Rises on Liquidity Squeeze as Banks Increase Borrowings from CBN…

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In the just concluded week, activity in the primary market was muted as there were no auction and maturing T-bills.

However, the Standing Lending
Facilities (SLF) worth N279.05 billion outweighed the Standing Deposit Facility (SDF) worth N45.84 billion – indicative of financial system liquidity strain as deposit money banks borrowed more money than they deposited with CBN.

Hence, given the squeeze in financial system liquidity as NIBOR rose for most tenor buckets tracked: NIBOR for 1 month, 3 months and 6 months tenor buckets increased to 5.30% (from 3.39%), 5.71% (from 4.27%) and 6.32% (from 4.33%) respectively.

However, overnight funds rate fell to 17.00% (from 19.58%).

Meanwhile, NITTY declined for most maturities tracked as investors continued to demand for short-term fixed income securities; hence, yields on 3 months, 6 months and 12 months maturities moderated to 1.92% (from 2.70%), 2.22% (from 2.27%) and 3.25% (from 3.44%) respectively.

However, yield on 1 month maturity rose to 1.80% (from 1.62%).

In the new week, T-bills worth N246.09 billion will mature via the primary and secondary markets which will more than offset T-bills worth N88.86 billion to be auctioned by CBN via the primary market; viz: 91-day bills worth N10.00 billion, 182-day bills worth N20.00 billion and 364-day bills worth N58.86 billion.

Amid anticipated liquidity boost, we expect NIBOR decline while stop rates of the issuances should also fall on demand pressure.