Inter-bank lending rates inched higher last week to an average of 15.83 per cent, from 15.66 per cent the previous week, after a large cash withdrawal by the Nigerian National Petroleum Corporation and a tax remittance by telecoms company MTN drained liquidity from the system.

NNPC, a major dollar supplier to the inter-bank market, sold about $400m to some lenders last week and recalled its naira proceeds to its account with the Central Bank of Nigeria, while telecoms giant MTN remitted part of its corporate tax to the government, draining liquidity from the system.

Reuters quoted a dealer as saying, “The market was very short this week (last week) because of the large cash outflows from the system and this resulted in the rates spike.”

Traders said liquidity was initially boosted by Treasury Bill repayments on Wednesday, but the market opened short on Friday with a cash deficit of about N76bn ($468m) due to the large outflows.

The CBN sold N100.62bn worth in three and six months treasury bills, $750m at the bi-weekly foreign exchange auction and an unspecified amount of dollars directly to some lenders, sucking cash from the system.The secured Open Buy Back was unchanged at 15 per cent, representing 300 basis points above the CBN’s 12 per cent benchmark rate, and five percentage points above the Standing Deposit Facility rate.

Source: Punch