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Nigerian interbank rates ease on improve cash outlook

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Friday February 24, 2012

Nigeria's interbank lending rates eased marginally this week to an average of 15 percent from last week's 15.25 percent on expectations of cash inflows from budgetary allocations to government agencies on Friday, traders said.

"People know that budget allocation has been approved and will soon be released, so there is this psychological impact on the market pricing. We are expecting that the budget funds will come in today or latest Monday and then rates will fall further," a dealer said.

Traders said the market opened with a cash deficit of about 9.50 billion naira ($3.18 million) on Friday, reflecting tight liquidity. But they said the cost of borrowing among banks should ease further next week with the expected release of budgetary funds.

The secured Open Buy Back (OBB) was unchanged at 14.50 percent, 250 basis points above the central bank's 12.0 percent benchmark rate, and 4.50 percentage points above the Standing Deposit Facility (SDF) rate.

Overnight placement dropped to 15 percent from 15.50 percent, while call money traded at 15.50 percent compared with 15.75 percent last week.

"There has been no cash inflow this week, but the market recorded huge outflows, pushing the market into deficit," another traders said.

Nigeria sold 149.65 billion naira ($953.00 million) worth of treasury bills this week with yields on the 182-day and 364-day papers lower than the previous auction, while the 91-day yields rose slightly.

Nigeria distributes oil and tax revenues to its three tiers of government from a centrally held account monthly. These funds help provide finance for banks operation in Africa's top crude exporter.

Traders said overnight borrowing could drop to around 14.50 percent next week if budget cash is disbursed.


Source: Reuters (Reporting by Oludare Mayowa)

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