By Ademola Alawiye with agency report

Inter-bank lending rates rose marginally by 0.83 per cent to 9.83 per cent on the average this week from nine per cent the previous week as cash outflows to treasury bills drained liquidity from the system.

At the inter-bank market, the secured Open Buy Back was flat at 8.50 per cent, 200 basis points above the Central Bank of Nigeria’s 6.50 per cent benchmark rate and 4.5 percentage points higher than the Standing Deposit Facility rate.

Overnight placement closed at 10 per cent, up from nine per cent, while call money traded at 11 per cent, up from nine per cent last week.

Reuters quoted traders as saying, “Large cash outflows to treasury bills purchased on both primary and secondary markets drained funds and pushed up the cost of borrowing among banks, despite efforts by the CBN to boost liquidity.

“There was an inflow of about N180bn refund on banks’ cash reserve requirement by the CBN this week but its impact was little on transactions.”

Dealers added that there was a restriction on how the fund should be utilised by the beneficiary banks, limiting its impact on the cost of funds in the market.

The CBN sold N130bn in 91-day, 182-day and 364-day treasury bills on Thursday as part of measures to control money supply in sub-Saharan Africa’s second-biggest economy and sold $650m at its bi-weekly foreign exchange auction.

The market opened on Friday with a balance of about N116.41bn in banks’ accounts with the CBN, but the bulk was the refund from CRR, which dealers said could not be used in major transactions.

“We expect rates to start falling once funds from budgetary allocations hit the system latest by Tuesday,” a dealer said.

Nigeria approved the disbursement of N413.3bn from its central accounts to the three tiers of government on Friday, and traders said half of the money should pass through banking systems and help ease liquidity.

The seven-day funds at the Nigeria Inter-Bank Offered Rate rose to 9.91 per cent from 9.66 per cent, while the 30-day closed at 11.37 per cent from 10.70 per cent.

The 60-day funds traded at 12.08 per cent from 11.29 per cent, while the 90-day climbed to 12.66 per cent from 12.12 per cent last week.

Source: Punch