Inter-bank rates fall on budget inflow


MONDAY, 19 JULY 2010 01:11        


Inter-bank lending rates retreated to 1.41 percent on average last week from 8.25 percent penultimate week following a large injection of funds from government allocations to public sector agencies, traders said weekend. N413.28 billion ($2.8 billion) was distributed from the federation accounts to three tiers of government for June. Some of the funds entered the system by Thursday, forcing down inter-bank lending rates, traders said.


The secured Open Buy Back (OBB) fell to 1.10 percent from 7.75 percent penultimate week. OBB closed last week with 10 basis points above the Standing Deposit Facility (SDF) rate and 4.90 percentage points below the central bank’s benchmark rate.Overnight placement slipped to 1.15 percent from 8.5 percent, while call money closed at 2.0 percent against 8.5 percent penultimate week. Dealers said about N271 billion of the budgetary allocation was credited to the accounts of the state and local governments with retail banks late on Thursday, pushing up the balance in the lenders’ accounts with the central bank to N331.35 billion at the weekend.


The balance was N54 billion at the weekend. “We expect rates to remain flat this week because we do not foresee any major cash outflows from the system, apart from the usual funding for foreign exchange purchases,” one dealer said.


Meanwhile, the Central Bank of Nigeria (CBN) sold N63.98 billion ($426.53 million) in short-dated treasury bills last week to help control money supply and assist lenders in managing their liquidity, the central bank said weekend.The central bank auctioned N45.40 billion in 182-day paper and N18.58 billion in 91-day bills on Wednesday, the results of the auction released weekend showed.


The regulator said the 182-day paper attracted a 4.0 percent coupon, while the 91-day bills attracted 2.90 percent at the auction. Investors offered to buy up to N150.42 billion worth of the papers, but the central bank stuck to its initial offer.





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