WEDNESDAY, 07 JULY 2010 01:22 BLESSING ANARO  

 

The Nigerian Inter-Bank Offer Rate (NIBOR), the rate at which banks lend money amongst themselves at the inter-bank market, rose to unprecedented high on Tuesday after the Nigerian National Petroleum Corporation (NNPC) said it was withdrawing unspecified amount of money from the banking system.

 

Dealers were piqued with the said withdrawal, knowing that the market will remain illiquid in the next eight days until the Federation Account Allocation Committee (FAAC) releases statutory allocation to the three tiers of government.

 

The call rate rose by more than two times from 2.5417 percent it opened the week on Monday to 6.0000 percent on Tuesday. The 7-day NIBOR also rose from 3.9250 percent to 7.2083 percent during the same period. The money market started experiencing some measure of tightness last week after about N135.28 billion left the system through the primary segment of the government securities market and the foreign exchange auctions.

 

Consequently, inter-bank rates started inching up to close higher at the end of last week. Last week, available data showed that the 7-day NIBOR closed the week at 3.67 percent, a 1.32 percent increase from the previous week’s figure of 2.35 percent, while the 90-day NIBOR closed the week at 8.25 percent, a 1.21 percent increase from the previous week’s figure of 7.04 percent.On Tuesday, all the rates reacted to the withdrawal by NNPC. The 30-day NIBOR rose from 6.8333 percent to 8.0833 percent, 60-day NIBOR from 7.6667 percent to 8.7833 percent, while the 90-day rate rose from 8.6250 percent to 9.3333 percent.

 

The 180-day rate rose from 9.2083 percent on Monday to 10.0833 percent on Tuesday, while the 365-day NIBOR rose from 9.8750 percent to 10.5833 percent during the period. Players in the money market who spoke with BusinessDay, but craved anonymity, said when there is scarcity of funds for a period, banks with relative liquidity tend to capitalise on the situation to make some gains. “Unless liquidity is somehow injected into the market in the next eight days, inter-bank lending would remain high until the FAAC releases its monthly statutory allocation into the system, thereby bringing down inter-bank lending temporarily.”

 

Last week, some amount of funds was also withdrawn from the system through Treasury Bills (TBs). At the 91-day Treasury Bill (TB) auction, a total of N31.57 billion worth of securities was offered and sold. The bill was 192.40 percent subscribed as N60.74 billion worth of bid was received. The bill was issued at a discount rate of 2.98 percent. A total of N10.55 billion matured bills were repaid into the system, resulting in a net outflow of N21.02 billion from this segment of the market.

 

At the 182-day TB auction, a total of N50.36 billion worth of securities was offered and sold, while it was 173.51 percent subscribed as N87.37 billion worth of bid was received. The bill was issued at a discount rate of four percent. A total of N30.36 billion matured bills were repaid into the system, resulting in a net outflow of N20 billion from this segment of the market. At the 364-day TB auction, a total of N50 billion worth of securities was offered and sold, while it was 188.01 percent subscribed as N94.01 billion worth of bid was received.

 

The bill was issued at a discount rate of 4.62 percent. A total of N30 billion matured bills was repaid into the system, resulting in a net outflow of N20 billion from this segment of the market. In all, this week, there was a net total outflow of N61.01 billion from the primary segment of the government securities market.

 

(Source:BusinessDay)