Nigerian interbank lending rates were flat at an average of 12 per cent last week as a slowdown in foreign exchange demand and the repayment of mature treasury bills boosted naira liquidity.

The Central Bank of Nigeria sold a combined $95m to lenders at its two auctions this week, far less than the average of $300m sold at the auction a month ago.

The market opened with a positive cash balance of N167bn ($1.07bn) on Friday, traders said.

The secured Open Buy Back was flat at 11.5 per cent, 50 basis points lower than the CBN’s 12 per cent benchmark rate and 1.5 basis points above the Standing Deposit Facility rate. Overnight placement and call money closed unchanged at 12 per cent and 12.5 per cent, respectively.

“We see rates gradually inching up next week as the central bank intensify its mopping-up exercise through the use of open market instruments and the expected outflow to treasury bills purchase at an auction next week,” one dealer said.

Also, the CBN plans to raise N129.8bn ($827m) by selling treasury bills with maturities ranging from three months to one year at its regular twice monthly debt auction on November 8.

The bank said it would issue N32.05bn in 91-day paper, N50bn in 182-day bills and N47.78bn in the 364-day paper.

CBN issues treasury bills to reduce money supply, curb inflation and help banks manage their liquidity.

Meanwhile, the naira traded flat against the dollar on the inter-bank market on Wednesday as expectations of dollar inflows from energy companies and offshore investors buying local debt provided forex liquidity, dealers said.

The naira closed at N157.10 to the dollar, the same level it closed on Tuesday.

Dealers said the naira initially weakened to N157.30 intraday but firmed after dollar sales by the local unit of Addax petroleum and some lenders selling hard currency to keep within the stipulated central bank open limit position for banks.

“We saw growing demand in the market initially because of cheaper rate at the interbank, which saw the naira testing N157.25/N157.30 level, but later closed firmer as some banks sold down their positions,” one dealer said.

CBN sold $50m at N155.74 to the dollar at its twice weekly auction on Wednesday, compared with $43.5m sold at N155.76 to the dollar on Monday.

Traders said more importers now preferred to buy dollars at the inter-bank market because it was cheaper than the effective rate at the central bank window. The central bank charges one percent commission on every dollar sold at its auction.

Source: Punch