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Nigerian interbank rate eases on cash inflows

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December 30, 2011

Nigeria's interbank lending rates eased further this week to an average of 14.08 percent, compared with 14.33 percent last week, as naira cash flows from oil revenues to government agencies boosted liquidity in the system to lower borrowing costs.

Dealers said market liquidity rose by about 168.58 billion naira in the week, from the release of about 79.68 billion naira in allocations from excess crude accounts to state and local government and 88.9 billion naira from matured treasury bills.

The secured open buy back (OBB) rate was slightly higher at 13.75 percent, from 13.50 percent last week, 1.75 percentage points above the central bank's 12 percent benchmark rate and 3.75 percentage points above the standing deposit facility rate.

Overnight placement fell to 14 percent, from 14.50 percent last week, while call money dropped to 14.50 percent, compared with 15 percent.

"The market was impacted positively by the additional cash inflows and low trading activities among banks because of the need to tidy up their books for the year end," one dealer said.

Dealers said the market opened on Friday on a positive balance of 244.12 billion naira, compared with 97.58 billion naira last Friday.

"We expect cost of borrowing to trend at this same level when the market reopens for business on Tuesday, but it could rise marginally as the central bank opens its bi-weekly forex auction and other transactions drain liquidity from the system," another dealer said.

Nigerian interbank lending rate rose gradually in the course of the year as the central bank moved to curb inflation and strengthen support for the local naira currency, which the bank said was under speculative attack.

The central bank raised its benchmark interest rate six times in the year to curb inflation and reduce pressure on the local currency.         



Source: Reuters (Reporting by Oludare Mayowa)


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