Nigeria interbank rates fall on budget cash inflow
Friday March 23, 2012
Nigeria's interbank lending rates fell sharply this week to an average of 13 percent, from 15.08 percent, as cash flow from February budgetary allocations to government agencies boosted liquidity in the system, traders said.
Nigeria distributed 620.7 billion naira ($3.94 billion) from oil receipts to its three tiers of government on Monday, and traders said the funds hit the system on Wednesday, sinking the cost of borrowing among banks.
Africa's top crude-oil exporter shares proceeds from oil sales from a centrally held account every month to its three tiers of government - federal, states and local - providing liquidity to the banking system and impacting on lending rates.
"The market opened with a cash balance of about 194 billion naira ($1.23 billion) on Friday, and this provides the needed relief for the market," one trader said. The market had closed on a negative balance of 129.55 billion naira last Friday.
The secured Open Buy Back (OBB) eased to 12.50 percent from, 14.50 percent last week, 50 basis points above the central bank's 12 percent benchmark rate, and 2.50 percentage points above the Standing Deposit Facility (SDF) rate.
Overnight placement fell to 13 percent, from 15.25 percent, while call money traded closed at 13.50 percent, against 15.50 percent last week.
Traders said rates are expected to inch up next week, as a result of aggressive liquidity mopped-up by the central bank through the sales of treasury bills and other expected cash outflows into foreign exchange and bond purchases next week.
Nigeria sold 101.22 billion naira worth of treasury bills this week at a regular debt auction, while the regulator also conducted daily open market operations to reduce the impact of budget allocations.
Africa's second biggest economy also plans to auction 50 billion naira worth of 2019 and 2022 bonds next week, which may further drain the system of liquidity and push up cost of borrowing among banks.
"Bulk of the liquidity in the system is being mopped-up by the central bank through OMO (open market operation) and this will significantly impact on cost of borrowing in the system if the exercise continues next week," another dealer said.