Inter-bank lending rates climbed higher to an average of 15.66 per cent last week, from 14.5 per cent recorded the previous week, after the Nigerian National Petroleum Corporation recalled a portion of its deposits with some banks and forex purchases drained liquidity.

Currency traders said the market opened with a cash deficit of about N78.7bn ($482.82m) on Friday, compared with a surplus of about N10bn last week.

Reuters quoted a dealer as saying, “The market is very short this week (last week) because of large cash outflows to foreign exchange purchases, NNPC withdrawals and debit for cash reserves.”

The secured Open Buy Back climbed to 15 per cent last week, from 14.25 per cent the previous week, representing 300 basis points above the Central Bank of Nigeria’s 12 per cent benchmark rate, and five percentage points above the Standing Deposit Facility rate. Overnight placement and call money closed at 16 per cent each, compared with 14.5 per cent and 14.75 per cent recorded the previous week respectively.

Another dealer was quoted as saying, “We see rates inching up early this week as the dearth of funds persist until the next budgetary allocation to government agencies hits the system, hopefully later this week.”

In a bid to reduce the pressure on the foreign exchange market, the CBN last week increased its dollar sales to $400m at the bi-weekly auction of the apex bank, from $300m sold last Monday.The CBN sold $400m at N155.90 to the United States dollar, compared to $300m sold at the same N155.90 last Monday.

The naira also eased further against the US dollar on the inter-bank despite the CBN’s direct intervention to calm the market and an increase in supply of the greenback at its bi-weekly foreign exchange auction.

The naira closed at N162.95 to the dollar on the inter-bank market last Wednesday, recovering from a 22-week low of N163.68 it hit the previous day. Dealers said the CBN had consistently intervened on the inter-bank market and had also increased the amount of dollars sold at its auction to support the naira.

Source: Punch/Ademola Alawiye