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Nigerian interbank rates ease on cash inflow

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Friday November 25, 2011 2:53pm

Nigeria's interbank lending rates eased this week to an average of 14.83 percent from last week's 15.50 percent after a portion of public sector wages hit the system and helped boost liquidity, traders said on Friday.

Traders said about 95 billion naira were released on Friday, helping to ease liquidity pressure.

"The market opened with a cash balance of about 148.10 billion naira on Friday due to the inflow and better than what the market opened with on Monday," one trader said.

The secured Open Buy Back (OBB) remained unchanged at 14 percent, 200 basis points above the central bank's 12 percent benchmark rate and 400 basis points above the Standing Deposit Facility (SDF) rate. Overnight placement eased to 15 percent from 16 percent, while call money closed at 15.50 percent lower than the 16.50 percent it closed at last week.

Dealers said call money rose as high as 17 percent in the week before the inflow due to cash inflows to foreign exchange, treasury bills and other transactions, but eased on Friday after increased liquidity.

Nigeria sold about $500 million at its bi-weekly foreign exchange auction this week and issued 111 billion naira in treasury bills on Thursday.

"We see rates rising next week because of the aggressive liquidity tightening by the central bank with the conduct of open market operation," another dealer said.

Dealers however said if the federation account allocation committee meet next week and agree to release budget funds, then liquidity will be up and rate ease.

Africa's second biggest economy after South Africa 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 disbursal of budgetary allocations from October oil revenues to the three tiers of government was due this week, but it has been held up because of a row between the central and state governments over the handling of the account.

The delay, which is the second of such this year could worsen liquidity problem in the banking system and lead to a rapid rise in the cost of borrowing among banks.

Indicative rates for the Nigeria interbank offered rate (NIBOR) closed lower, reflecting the sentiment in the market, with the seven day funds falling to 16.75 percent from 17.25 percent last week. Thirty-day funds closed lower at 17.08 percent against 17.50 percent, the 60-day closed at 17.37 percent against 17.75 percent, while the 90-day dropped to 17.62 percent from 18.08 percent.


Source: Reuters (Reporting by Oludare Mayowa)

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