Nigerian interbank rate falls as liquidity increases
Friday December 16, 2011 2:58pm
Nigeria's interbank lending rate fell marginally this week, to average 15.83 percent, helped by inflows as some revenues from the central government's crude oil 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," one dealer said.
The interbank lending rate came down from 16 percent last week.
Traders said the market opened on Friday with a credit balance of about 18.33 billion naira ($113.01 million) compared to a deficit of 36.70 billion naira last Friday.
The secured Open Buy Back (OBB) eased to 14 percent from 15 percent last week, 200 basis points above the central bank's 12 percent benchmark rate and 600 basis points above the Standing Deposit Facility (SDF) rate.
Overnight placement dropped to 16.50 percent compared with 16.75 percent last week, while call money closed unchanged at 17 percent.
Traders said the cost of borrowing in the interbank 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 64.10 billion naira 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 forex auction this week.
"Cash balances in banks accounts with the central bank will drop next week because of major funding today (Friday) for forex, bonds and NNPC withdrawal, which means the cost of borrowing will go up," another dealer said.
Nigeria announced the distribution of 612 billion naira to the three tiers of government from November revenue accounts late on Friday. That raised expectations that liquidity in the system will increase next week and borrowing costs will fall further in the interbank market.
Indicative rates for the Nigeria interbank offered rate (NIBOR) closed lower, pricing in expectations of possible cash inflows from the disbursal from budgetary allocations next week. The seven-day funds rate eased to 16.62 percent from 17 percent last week.
The 30-day funds rate closed at 17 percent, dipping from 17.29 percent; the 60-day closed at 17.37 percent compared with 17.66 percent; while the 90-day dropped to 17.50 percent from 17.83 percent.