In May-2020, the financial system liquidity remained buoyant, supported by net inflows of funds from OMO, retail FX refunds, FAAC distributions as well as Bond coupon payments.
Overall, the average interbank funding rates (OBB & O/N rate) closed at 2.6% in May-2020 relative to 2.5% in Mar-2020.
Notably, the monetary policy committee reduced the MPR by 100 bps to 12.5%. As a result, we saw increased activity at the Standing Lending Facility window.
In terms of primary market activities, the CBN only mopped up 22.3% of the N512.2bn OMO bills that matured during the month. This was at a relatively low average interest rate of 8.6% (Apr-2020: 12.2%).
At the primary NTB market, the CBN on behalf of the FG sold 2.2x of all maturing bills worth N202.1bn at a low average stop rate of 3.06% (Apr-2020: 2.95%).
At the secondary market, the sentiment was bullish.
Notably, average NTB yields fell by 58bps m/m to settle at 2.1% as local investors with idle liquidity continued to search for risk-free short-term investment outlets.
Similarly, average OMO yield declined sharply by 3.8% m/m to settle at 6.1% thanks to the excess liquidity in the system.
In June 2020, we expect the financial system to remain sparsely liquid, as the DMO seeks to rake in more funds from the June Bond auction, in line with its aggressive borrowing plan.
United Capital Plc Research
