Nigerian inter-bank rate falls as liquidity increases

Nigeria’s inter-bank landing rate fell marginally this week, to average 15.83 per cent, helped by inflows as some revenues from the federation account were distributed to government agencies. Some funds came into the system through the allocation from the excess crude account to state and local government on Wednesday, which helped raise the volume of liquidity in the market in the week. The inter-bank lending rate came down from 16 per cent of last week.
The market opened on Friday with a credit balance of about N18.33 billion ($113.01 million) compared to a deficit of N36.70 billion the previous Friday. The secured Open Buy Back (OBB) eased to 14 per cent from 15 per cent last week, 200 basis points above the central bank’s 12 per cent benchmark rate and 600 basis points above the Standing Deposit Facility (SDF) rate. Overnight placement dropped to 16.50 per cent compared with 16.75 per cent last week, while call money closed unchanged at 17 per cent.
Traders said the cost of borrowing in the inter-bank market was likely to increase next week as funding for foreign exchange and bond purchases and withdrawals by the state-run energy firm NNPC from its accounts to the central bank on Friday would adversely affect liquidity in the system. Nigeria issued N64.10 billion worth of 10-year sovereign bonds with different maturity dates on Wednesday at yields lower than at its previous auction, while the central bank sold $400 million at its bi-weekly foreign exchange auction last week. Cash balances in banks accounts with the central bank will drop next week because of major funding today (Friday) for foreign exchange bonds and NNPC withdrawal, which means the cost of borrowing will go up.