Monthly Money Market Review and Outlook
In August 2020, financial system liquidity improved compared to the previous month, as the effect of naira inflows outweighed naira outflows.
The Federation Account Allocation Committee -FAAC inflows (N342 billion) and net-OMO inflows (of about N712 billion) outweighed the double CRR debit witnessed during the month.
Overall, the monthly average interbank funding rates (OBB & O/N rate) settled at 8.1 percent in August-2020 relative to 10.0 percent in July-2020.
In terms of primary money market activities, the CBN mopped up just 16.7 percent of the N855 billion worth of OMO bills that matured during the month.
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At the NTB market, the CBN on behalf of the FG successfully rolled over the full amount of maturing bills worth N254.4 billion at a lower average stop rate of 2.01 percent (July-2020: 2.18 percent).
At the secondary NTB market, activities were largely muted as the low-interest rate kept investors interest downbeat. Accordingly, average NTB yield ticked up to 2.02 percent vs 1.75 percent in July-2020. On the other hand, we saw a moderately bullish sentiment in the OMO market as average yield dropped to 3.12 percent (vs. 4.23 percent in July-2020).
In September-2020, we expect about N1.2 trillion worth of OMO maturity to hit the system. However, system liquidity should remain moderate on the expectation that the CBN will continue to use CRR penalty debit alongside new OMO issuance to control the size of liquidity in the financial system.
Overall, we expect that rates will remain within low-single-digit through September-2020.
-United Capital Plc