Liquidity Pressure Persists As Banks Dump N30.6tr with CBN Over 5 Days

Liquidity conditions in the money market remained tight last week, as deposit money banks placed about N30.64 trillion with the Central Bank of Nigeria through the Standing Deposit Facility (SDF) window over the five trading sessions.

Data from the market showed that the huge deposits at the apex bank came amid persistent liquidity pressure in the financial system, with the average liquidity deficit settling at N5.7 trillion, slightly wider than the N5.1 trillion recorded in the previous week.

The breakdown of SDF placements showed that banks deposited N5.20 trillion on Monday, N5.27 trillion on Tuesday, N6.96 trillion on Wednesday, N6.69 trillion on Thursday, and N6.51 trillion on Friday, bringing the five-day total to N30.639 trillion, higher than the N26.161 trillion recorded in the preceding week.

According to analysts, the large deposits reflect banks’ cautious liquidity management amid elevated short-term interest rates. Despite the tight liquidity environment, the overnight rate (OPR) remained unchanged at 22.0 per cent, while the overnight lending rate climbed by 12 basis points week on week to 22.3 per cent.

At the treasury bills primary market, the apex offered N850 billion across the 91-day, 182-day and 364-day instruments. Market data showed that the 91-day bill recorded an offer of N100 billion but attracted N130.7 billion in allotments, while the 182-day instrument had an offer of N150 billion and attracted N71.4 billion in allotments. The 364-day paper dominated the auction with N600 billion on offer and N731.8 billion allotted.

Overall demand stood at N2.8 trillion, translating to a 3.3 times bid-to-offer ratio, with investor appetite largely concentrated on the 364-day instrument, which recorded a 4.3 times subscription rate. Stop rates settled at 16.0 per cent for the short tenor and 16.7 per cent for both the mid and long dated instruments, while total allotment came to N933.9 billion, about 9.9 per cent above the initial offer.