Inter-bank lending rates rose last week to an average of 14.66 per cent, from 14.16 per cent recorded the previous week, as cash outflows to bonds and dollar purchases drained liquidity in the market further.

The Federal Government sold N70bn ($440.67m) worth of five-year and 10-year bonds maturing in 2017 and 2022 at its regular auction on Wednesday, while a total of $350m was sold at the bi-weekly foreign exchange auction this week.

Traders said the market opened with a cash balance of about N32bn on Friday, compared with an N87bn balance last Friday.

Reuters quoted a dealer as saying, “The market is short. That was the reason rates went up slightly higher this week but the inflow of about N71bn on Friday in cash call to joint venture oil producing partners helped calm the market a little today (Friday).”

The secured Open Buy Back was unchanged at 14 per cent, representing 200 basis points above the Central Bank of Nigeria’s 12 per cent benchmark rate, and four percentage points above the Standing Deposit Facility rate.

But overnight placement and call money traded at 15 per cent each, compared with 14.25 per cent each the previous week.

Another dealer was quoted as saying, “We see rates initially trending downward early in the week because of the anticipated flow of about N200bn in matured treasury bills and bonds, but it could be backed up with selling of treasury bills at the primary auction and open market operations later in the week.”

The CBN plans to raise about N126bn in primary market treasury bills on Wednesday, while cash flow to foreign exchange purchases could further soak up cash from the system.

Foreign exchange reserves rose to their highest in 21 months to $37.02bn by May 14, from $36.66bn at the end of last month, the latest figures from the CBN showed on Wednesday.

Forex reserves in the country stood at $33.94bn a year ago. The last time the reserves were at this level was in August 2010.

The naira fell to its lowest level in two months against the United States dollar on the inter-bank market on Wednesday, on strong dollar demand from investors repatriating their dividends abroad, traders said.

The naira closed at N158.90 to the dollar on the inter-bank market, the lowest since the middle of February, compared with the N158.03 it closed at on Tuesday.

Source: Punch