Inter-bank lending rates climbed to an average of 16.33 per cent on Friday, compared with 13.5 per cent last week, on the back of cash withdrawals by the Nigerian National Petroleum Corporation  and foreign exchange purchases.

Reuters reported that The market opened with a negative balance of N42bn ($266.08m) on Friday, after the NNPC recalled a portion of its deposits with some lenders, and the Central Bank of Nigeria debited the accounts of banks for foreign exchange purchased at a Wednesday auction.

The NNPC supplies the bulk of dollars traded on the inter-bank foreign exchange market and usually withdraws a portion of the naira proceeds to its account with the CBN to fund its obligations to the government. It sold about $450m to some banks last week.

The secured Open Buy Back rose to 15.75 per cent, compared with 12 per cent last week, 3.75 percentage points above the central bank’s 12 per cent benchmark rate, and 5.75 percentage points above the Standing Deposit Facility rate.

Overnight placement closed at 16.50 per cent, from 14 per cent last week, while call money rose to 16.75 per cent, compared with 14.50 per cent last week.

“We see rates falling by the middle of next week on the back of improve liquidity from budgetary allocations and open market operations (OMO) treasury bill maturities,” one dealer said.

A total of N570bn  was shared between Nigeria’s three tiers of government — federal, state and local — on Friday and about half of the amount belonging to state and local governments is expected to flow through the banking system by Tuesday.

Source: Punch