Inter-bank lending rates rose more than 80 basis points last week to an average of 11.41 per cent, compared with 10.58 per cent the previous week, as cash outflows to Treasury bill sales and a withdrawal by the Nigerian National Petroleum Corporation drained liquidity.
Dealers said Central Bank of Nigeria had been selling treasury bills through open market operations and a primary market auction last week.
Reuters quoted a dealer as saying, “The market liquidity has dropped because of cash outflows to OMO auction, the NNPC withdrawal and foreign exchange purchases, with cost of borrowing marginally up in the week.â€ÂÂ
The NNPC sells bulk of dollars traded on the inter-bank foreign exchange market, and then usually recalls a portion of the proceeds to its account with the CBN to fulfill its obligations to the government.
Dealers said the market opened with a positive cash balance of about N129bn ($820.40m), compared with a cash balance of N375bn last Friday.
The secured Open Buy Back inched up to 11 per cent, compared with 10.25 per cent last week, representing 100 basis points lower than the CBN’s 12 per cent benchmark rate, and 100 basis points above the Standing Deposit Facility rate.
Overnight placement traded at 11.25 per cent, up from 10.50 per cent, while call money rose to 12 per cent, compared with 10.50 per cent recorded the previous week.
“We see rates inching up further next week if the CBN continue the conduct of its OMO and NNPC recall some more cash from the system,†another dealer said.
The CBN sold N171.83bn ($1.09bn) in treasury bills with maturities ranging from three months to one-year, with yields going up 30 basis points compared with rates at the previous auction.
Inter-bank lending rates were flat across the board the previous week at an average of 10.58 per cent, as liquidity was buoyed by the repayment of about N190bn in matured open market operation treasury bills.
Dealers said the repaid treasury bills helped enable the market to open with a positive cash balance of N375bn.
Source: Punch
