By Ademola Alawiye

Interbank lending rates fell by 1.59 per cent to 9.66 per cent on average last week, from 11.25 per cent the previous week as the inflow of N229bn ($1.48bn) in budgetary allocations lifted liquidity in the market.

The Secured Open Buy Back stood at 9.50 per cent, 200 basis points above the Central Bank of Nigeria’s 7.50 per cent benchmark rate and 4.5 percentage points higher than the Standing Deposit Facility rate.

Overnight placement and call money dropped by 2.25 per cent to 9.75 per cent from 12.0 per cent and 12.25 per cent, respectively.

The indicative rates for the Nigeria Inter-bank Offered Rate closed lower, with the seven-day fund easing to 10.91 per cent from 12.29 per cent a week earlier. The 30-day fund fell to 12.12 per cent, from 12.87 per cent. The 60-day was down to 12.91 per cent from 13.66 per cent, while the 90-day dropped to 13.60 per cent from 14.29 per cent.

According to dealers, about half of the N425bn allocated last Monday to the three tiers of government helped to lift liquidity as it came into the banking system on Wednesday.

The cost of borrowing is, however, expected to rise steadily to around 10.50 per cent on average next week due to outflows.

Reuters quoted a dealer as saying, “Rates are expected to inch up gradually next week because liquidity will keep dropping as a result of funding for foreign exchange and outflows to other transactions.”

The CBN, last Wednesday intervened in the foreign exchange market as it offered $300m for sale at the foreign exchange auction.

Inter-bank lending rates had inched up to 11.25 per cent on average the previous week from 10.58 per cent as large cash withdrawals by the Nigerian National Petroleum Corporation drained liquidity from the system.

Traders had said that outflows to foreign exchange purchases helped depress liquidity in the system, outweighing disbursals from oil savings to government agencies and payments for maturing treasury bills.

Traders also said that the market reacted to the huge cash withdrawal by the NNPC which left the system in deficit of about N4.8bn ($30m).

They, however, said that the rates would inch up slightly or remain around 11.5 per cent on average until there were significant inflows into the system.

Source: Punch