Inter-bank lending rates jumped last week to an average of 13.91 per cent, from 11.83 per cent recorded last week, after the Central Bank of Nigeria issued about N90bn ($572.79m) worth of treasury bills to mop up excess liquidity.

Currency traders said the CBN had been conducting Open Market Operation for the past week after about N300bn in budgetary allocations was disbursed to government agencies, in a move to reduce impact of money supply on price stability.

Reuters quoted a dealer as saying, “As long as this continues, cost of borrowing will gradually inch up.”

Dealers said the market opened with a cash balance of about N131bn last Friday, compared with N331.81bn it opened with the previous Friday.

The secured Open Buy Back climbed to 13.50 per cent from 11.50 per cent last week, representing 150 basis points above CBN’s 12 per cent benchmark rate, and 3.5 percentage points above the Standing Deposit Facility rate.

Overnight placement traded at 14 per cent, compared with 12 per cent the previous week, call money closed higher at 14.25 per cent, from 12 per cent the previous week.

Another dealer was quoted as saying, “Other cash outflows to foreign exchange purchases and other transactions are expected to further drain liquidity from the system.

The CBN conducts OMO regularly as part of measures to curb inflation and control money supply.

The naira was stable on both the inter-bank market and the official window on Wednesday as sales of about $194m by two multinational oil companies to some lenders helped counter surging demand for dollars by importers.

The naira closed at N157.40 to the dollar on the inter-bank market, after rising to around N157.18 as the oil companies – named by traders as ExxonMobil and Agip – sold the greenback.

Traders said strong demand from fuel and finished products importers had been piling pressure on the local currency until the flows from the oil companies helped to calm the market.

Source: Punch