Inter-bank lending rates eased further last week to an average of 10.75 per cent, from 11 per cent recorded the previous week, as cash from mature bonds and bills hit the market and unattractive yields on treasury bills limited central bank mop-up efforts.

Dealers said about N81bn ($512.33m) in mature bonds and open market operations bills were repaid.

Reuters quoted a dealer as saying, “The system is awash with liquidity and the Central Bank of Nigeria has not done OMO since to mop-up idle funds in the market, because banks are quoting higher bids than it was willing to pay for the bills.”

Yields on the economy’s fixed income paper have been falling across the board, driven by a mix of local and offshore investors’ appetite for Nigerian debt.The market opened with a cash balance of about N227bn on Friday, marginally lower than about N237bn that it was at last Friday.

The Secured Open Buy Back was flat at 10.5 per cent, 1.5 percentage points lower than the CBN’s 12 per cent benchmark rate, and 50 basis points above the standing deposit facility rate.The overnight rate closed at 10.75 per cent, from 11 per cent last week, while call rates fell to 11 per cent from 11.5 percent previously.

“We expect the system to remain very liquid next week and rates stable unless the CBN issues fresh OMO bills to mop up idle funds from the system,” another dealer said.

The CBN plans to issue N142.97bn in Treasury Bills ranging from three-month to one-year maturities at its regular auction this week, but dealers said the amount being offered was lower than the amount in bills due to mature.

The naira firmed against the US dollar on the inter-bank market on Wednesday, supported by dollar sales by an oil company and some banks towards the close of trading.The naira closed at N158.25 to the dollar on the inter-bank, stronger than the N158.15 it closed at the previous day. Traders said a local unit of US oil giant, Chevron sold about $12m to some lenders, while some units of foreign banks sold additional dollars in the market to enable them to stay within the stipulated one per cent open position limit. 

Source: Punch