The rates at which banks borrow from one another called Inter-Bank Rates are expected to shoot-up this week following strong demand for election fund as the general election draws nearer. As the politically exposed persons withdraw from the banking system for electioneering campaign and more so as there is no expected inflow from Federation Account Allocation Committee (FAAC), liquidity levels may remain tight, analysts have said. Meanwhile, the CBN is expected to repay N47.8 billion maturing T-bills next week (Thursday, March 26) and issue new instruments worth N97.8 billion, implying a net-outflow of N50.0 billion, according to analysts at Afrinvest. Liquidity levels in the money market opened last week tighter at N98.0bn on Monday from an opening level of N261.4bn previous Friday.
This lower level thus brought the OBB and Overnight rates to 25.0 percent and 26.8 percent respectively. Liquidity levels improved slightly to N125.9bn (opening balance) on Tuesday, easing the liquidity crunch in the market. Consequently, Standing Lending Facility (SLF) accessed by banks from the CBN Discount window reduced to N45.0bn while rates in the money market also inched southwards. Hence, rates declined to 15.0 percent (OBB) and 15.9 percent (Overnight).
On Wednesday however, as liquidity level tightened to N76.1bn, OBB and Overnight rates also scaled higher marginally by 50bps and 58bps respectively. Maturing Treasury bills instruments totalling N167.2bn hit the system on Wednesday, but were promptly mopped up via a re-issuance which cancelled the effect of the initial liquidity injection.
