How money market rates stabilised in first three months

In the first quarter of 2015, major indicators in the money market were influenced by liquidity condition, according to the Central Bank of Nigeria (CBN).

Specifically, short-term money market rates stabilized around the Monetary Policy Rate, although with some spikes due to major withdrawals, including the execution of the Nigerian National Petroleum Company (NNPC) mandate.

The market was able to achieve some level of stability, especially at the foreign exchange segment with improved confidence by market players. Open market operations remained the main instrument of monetary policy during the period.

The CBN’s Economic Report for first quarter of 2015 indicated that the total value of money market assets outstanding at the end of Q1 2015 stood at N8,307.5 billion, showing an increase of 8.4 percent, compared with the increase of 3.5 percent at the end of the fourth quarter of 2014. The development was attributed, largely, to the 12.9 percent increase in the FGN Bonds outstanding.

Available data indicated mixed developments in banks’ deposit and lending rates during the first quarter of 2015. All rates on deposits of various maturities rose from a range of 3.44 – 9.99 percent in the fourth quarter of 2014 to 3.57 – 9.7 percent in the first quarter of 2015. At 8.54 percent, the average term deposit rate fell by 0.06 percentage point below its level in the fourth quarter of 2014. The maximum and prime lending rates, however, rose by 0.50 and 0.56 percentage point to 26.30 and 16.84 percent, respectively, compared with the level at the end of the fourth quarter of 2014.

Consequently, the spread between the weighted average term deposit and maximum lending rates widened by 0.31 percentage point to 17.52 percentage points at the end of the first quarter of 2015. The spread between the average savings deposit and the maximum lending rates, also, widened by 0.37 percentage point to 22.73 percentage points, compared with 22.36 percentage point in the fourth quarter of 2014.

With the headline inflation rate at 8.5 percent at end-March 2015, most deposit and lending rates were positive in real terms except for the average savings and 7- days deposits.

At the interbank funds segment, the weighted average interbank call rate, which stood at 15.95 percent at the end of the preceding quarter, fell by 0.52 percentage point to 15.43 percent in the first quarter of 2015, reflecting the liquidity condition in the banking system. However, the weighted average rate at the Open-Buy-Back (OBB) segment rose by 2.82 percentage points to 17.61 percent.

The Nigeria Interbank Offered Rate (NIBOR) for the 7-day tenor rose to 12.16 percent, above the 11.53 percent in the preceding quarter. Similarly, the 30-day tenor rose from 13.13 percent in the preceding quarter to 14.90 percent in the first quarter of 2015.