By Babajide Komolafe

Cost of funds in the interbank money market fell by 5.4 percentage points last week. The development was triggered by a 42 per cent increase in the money market liquidity.

Data from FMDQ showed that interest rate on Collateralised lending (Open Buy Back, OBB) fell by 5.5 percentage points to 4.5 per cent last week from 10 per cent the previous week.

Similarly, the interest rate on Overnight lending fell by 5.2 percentage points to 5.25 per cent last week from 10.5 per cent the previous week. 

Financial Vanguard  analysis showed that the decline was prompted by a 42 per cent increase in interbank liquidity to N253.7 billion last  week from N178. 43 per cent the previous. 

READ ALSO: Cost of funds defies 127% increase in interbank liquidity

Among other things the increased market liquidity was buoyed by inflow of N70 billion from matured secondary market (Open Market Operations, OMO) treasury bills on Monday. 

The 42 per cent increase in market liquidity is in contrast to the 34 per cent decline in average market liquidity in December. 

Financial Vanguard  analysis showed that the average interbank opening balance fell to   N111.83 billion   in December from   N169.72 billion   in November.

The decline was among other things caused by   the funding of Asset Management Corporation of Nigeria (AMCON) debit from the CBN.

This cancelled the impact of N158 billion net inflow from OMO treasury bills. During the month, the CBN auctioned N37 billion worth of OMO billions while it repaid N195 billion worth of matured OMO bills.

However, analysts at Financial Derivatives Company, FDC, projected low market liquidity due to increased dollar  sales to banks by the CBN and possible currency adjustments.

Vanguard News Nigeria

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