By Ademola Alawiye

Monday, 10 Jan 2011

Traders have said that the withdrawal of funds by the Nigerian National Petroleum Corporation on Friday will increase inter-bank rates this week.

According to traders, who spoke to our correspondent on Friday, the removal of funds by NNPC will reduce liquidity and push the cost of borrowing up.

Traders said that the cash injection of $986m from the excess crude account last Tuesday increased liquidity in the system last week.

Meanwhile, inter-bank rates dropped to six per cent last week, from 8.9 per cent at the end of last year.

The rates fell as a result of inflows from budget disbursals by government.

The Secured Open Buy Back dropped to five per cent, representing 125 basis points below the Central Bank of Nigeria‘s 6.25 per cent benchmark rate and 75 percentage points above the Standing Deposit Facility rate, from 8.25 per cent at the end of December.

Overnight placement dropped by three per cent to close at six per cent, from nine per cent last week.

The CBN, last week issued new rules guiding the sales of foreign currency in the country.

According to a statement on the CBN website, the revision of the guidelines was to prohibit deposit money banks from selling foreign currency purchased at its twice weekly auctions to bureaus de change and hotels.

The statement noted that the funds purchased from it at the auctions must be used for eligible transactions only.

The CBN on November 3, 2010, in a circular referenced, FPR/DIR/CIR/FXM/01/004, cancelled the issuance of class ‘A‘ BDCs licences, following its review of the two-tier structure of the market.

 

Source: Punch