Inter-bank lending rates inched up slightly to an average of 14.50 per cent last week, compared to 14.25 per cent recorded the previous week, as banks funded their foreign exchange and treasury bill purchases.

The Central Bank of Nigeria sold a total of N137.97bn ($848.78m) in treasury bills, ranging from three months to one year at its bi-monthly auction. They were sold at higher yields than at the previous auction, while a total of $600m was sold at the CBN’s bi-weekly forex auction last week.

Traders said cash outflows to the purchases drained liquidity from the system, creating naira dearth and upswing in cost of borrowing among banks.

The market opened with a cash balance of about N10bn ($61.52m) on Friday, down from about N9bn last Friday.

Reuters quoted a dealer as saying, “The market has remained very tight because of lack of cash inflows.”

The naira has been falling sharply against the dollar in recent weeks, but that has been driven largely by unmet strong dollar demand, rather than readily available naira liquidity.

The Secured Open Buy Back inched up to 14.25 per cent, from 14 per cent the previous week, representing 220 basis points above the CBN’s 12 per cent benchmark rate, and 4.25 percentage points above the Standing Deposit Facility rate.

Overnight placement also closed at 14.50 per cent last week, compared with 14.25 per cent the previous week, while call money rose to 14.75 per cent last week, from 14.50 per cent week.

Another dealer was quoted as saying, “We see rates inching up further this week as the market become very tight until the disbursement of May budgetary allocations.”

Nigeria shares proceeds from oil sales from a centrally held account every month to its three tiers of government – federal, states and local – providing liquidity to the banking system which usually pushes down inter-bank rates.

Source: Punch