The Nigerian interbank lending rates climbed on Friday to an average of 14.83 percent, from 14.50 percent last week, as a two week delay in the disbursal of September budgetary allocations started to dry up liquidity.
The disbursal of budgetary allocations from September oil revenues to the three tiers of government was due two weeks ago, but it has been held up by what traders say is a row between the central bank and the government over the handling of the account. The delay is starving the banking system of liquidity.
Few details have emerged and neither the central bank nor the government has commented on the alleged row, which has figured prominently local press reports in the past week.
Nigeria, sub-Saharan Africa's second biggest economy, distributes oil funds from centrally held accounts every month to its three tiers of government -- federal, states and local -- which provides a much needed cash inflow to the banking system.
The secured Open Buy Back (OBB) rate was unchanged at 14 percent, from 12 percent last week, 200 basis points above the central bank's 12 percent benchmark rate and 400 basis points above the Standing Deposit Facility (SDF) rate.
But the overnight placement climbed to 15 percent, from 14.50 percent, while call money rose to 15.50 percent, from 15 percent the previous week.
Traders said the market opened on Friday with a cash balance of 23.50 billion Nigerian naira ($147.29 million), as foreign exchange and treasury bill purchases drained liquidity.
"The market remains very tight because of the stalemate on the disbursement of budgetary allocation," one dealer said.
Another said: "We are expecting it to remain tight next week until the issue around the disbursal of Sept. monthly allocations is resolved and cash is released."
Indicative rates for the Nigeria interbank offered rate (NIBOR) also climbed in tandem with the short-end of the market, with the seven day funds closing at higher at 16.83 percent from 16.04 percent last week.
Thirty-day funds rose to 17.29 percent from 16.04 percent, the 60-day increased to 17.66 percent against 16.95 percent, while the 90-day rose to 17.95 percent from 17.37 percent.