By Ademola Alawiye

Monday, 1 Nov 2010

The inter-bank lending rates dropped last week to eight per cent, from 8.5 per cent recorded the previous week as a result of about N49bn released into the system for personnel remuneration benefits of the Federal Civil Service.

Analysts added that abatement of demand at the foreign exchange auction market, as well as the low demand at the government securities market, further accounted for the drop in inter-bank rates.

The Secured Open Buy Back dropped by 125 basis points, representing 7.5 per cent from eight per cent.

Overnight placement fell to eight per cent from 8.5 per cent, while call rate closed at 8.5 per cent from nine per cent recorded last week.

Reuters quoted dealers as saying on Friday that the inflows for personnel costs and repayment on matured bonds into the market raised the level of liquidity in the system.

The dealers said cash outflows to the purchase of N63bn in treasury bills and $343m in foreign exchange last week were not enough to impact negatively on the inter-bank market because of the commensurate inflows.

They added that they expected inter-bank rates to remain stable around 8.5 per cent throughout this week as no major cash outflow was anticipated.

Available data from the weekly Nigerian money market report of FSDH Securities showed that the seven day Nigeria Inter-Bank Offered Rate closed the week at 8.75 per cent, a 71 basis point decrease from the previous week‘s figure of 9.46 per cent.

The 90 day NIBOR closed the week at 11.95 per cent, a 47 basis point decrease from the previous week‘s figure of 12.42 per cent.

On the fixed income market outlook, analysts said, ”We expect some degree of withdrawals from the market through the foreign exchange market and mopping up activities by the Central Bank of Nigeria.

“Cumulatively, we expect the market to remain slightly tight, but the tightness may not be sufficient to alter the inter-bank rates from the current level.”

Source: Punch