By Ademola Alawiye

Analysts have said that inter-bank rates will rise as a result of liquidity tightness in the financial market after the Eid-il-Fitr celebrations.

Analysts at First Security Discount House in their weekly report said, “Transactions in the Nigerian financial market this week will be reduced to three days because of the public holidays declared by the Federal Government for Tuesday and Wednesday.

“We expect maturities worth about N140bn to be repaid into the system in the coming week. Also, we expect the Central Bank of Nigeria to mop up liquidity through its usual Open Market Operations. We expect the combination of these activities to bring about liquidity tightness during the week. Consequently, we expect that inter-bank rates should inch up in the coming week.”

The analysts added that there should be convergence between the parallel and official foreign exchange rates as the CBN continued in its efforts to stabilise the value of the naira around three per cent band.

Demand for the United States dollar at the CBN regulated Wholesale Dutch Auction System had surged by 23 per cent compared with the total amount offered by the regulator on Monday.

Currency dealers attributed the rise to the single auction held by the CBN this week as a result of the public holidays declared by the government to celebrate the Eid-el-Fitr.

The naira weakened against the dollar as demand for the greenback outweighed supply at the CBN’s bi-weekly auction after the regulator was unable to meet $137m of the total demand.

The local currency closed at N155 to the dollar at the inter-bank market on Monday compared to N154.70 to a dollar it closed with on Friday.

At the official window, demand surged to $736.71m, while the CBN sold only $600m at N152.40 to the dollar at the auction. The regulator had sold $400m at N152.10 to the dollar at the previous auction last Wednesday.

Available data showed that the seven-day Nigerian Inter- Bank Offered Rate closed last week at 9.25 per cent, a 25 basis-point increase from the previous week’s figure of nine per cent, while 90-day NIBOR closed last week at 11.75 per cent, a 21 basis-point increase from the previous week’s figure of 11.54 per cent.

At the 91-day Treasury Bill auction, a total of N29.65bn worth of securities was offered and sold last week, while N12.39m was sold to non-competitive bidders, bringing total offer and sale to N42.04bn. The bill was 162.20 per cent subscribed as N48.09bn worth of bid was received from competitive bid. The bill was issued at a discount rate of 7.50 per cent.

Source: Punch