Money Market Review and Outlook

OBB and ON rates opened the week at 3.8% and 4.3% due to robust system liquidity. However, rates rose 2.5% and 2.3% to settle at 6.3% and 6.6% respectively on Tuesday as the CBN mopped up about N40.3bn from the system. OBB and ON rates however moderated to 3.8% and 4.4% on Wednesday as  inflows from unfulfilled FX provisioning refunds by the CBN to the DMBs for the previous week hit the system. Market liquidity stood at N923.8bn on Wednesday morning but reduced to about N405bn by market open on Thursday due to deposits made by DMBs for special FX intervention.  OBB and ON rates closed the week down 0.7% apiece W-O-W to close at 3.1% and 3.6% at the end of Friday’s trading session.

In line with the above, activity in the T-bills market was broadly bullish this week as average rate declined on most trading days. Average T-bills rate eased 0.6% from the previous trading session to close at 8.0% on Monday. Rate declined 0.1% further to 7.9% on Tuesday amidst increased activities on short termed instruments. T-bills worth N218.9bn was auctioned on Wednesday, allotted bills included N19.0bn of the 91-day, N33.5bn of the 182-day and N166.40bn of the 364-day bills at stop rates of 6.1%, 8.7% and 9.5%respectively. Interest was majorly in the 364-day T-bills which was oversubscribed by about 175.4% as against the 91day T-bills auction which was undersubscribed by 54.5%. The impact of the auction on system liquidity was however offset by a T-bills maturity of the same net total amount. Average T-bills rates eased further on Wednesday, down 0.1% to settle at 7.7%.

In view of plans by the Apex Bank to aggressively mop up system liquidity as indicated during the week, we anticipate an uptrend in money market rates in the interim, however weekly FX provisioning and refunding will continue to bring about marginal swings in rates.