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Nigerian interbank rates rise after subsidy dispute

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Friday January 20, 2012 2:50pm

* Market shut during 8-day strike over fuel subsidy 

* Traders expect release of funds to boost liquidity

Nigeria's interbank lending rates rose on Friday to an average of 14.25 percent from 14 percent on Tuesday as foreign exchange purchases and other dealings drained liquidity from the system.

The market was closed for business last week due to an eight day strike prompted by a dispute over fuel import subsidies.

The secured open buy back (OBB) rate closed at 14 percent on Friday, up from 13.75 percent on Tuesday. OBB was 200 basis points above the central bank's 12 percent benchmark rate and 4.00 percentage points above the standing deposit facility rate.

Overnight placement rose to 14.25 percent, from 14 percent last week, while call money jumped to 14.50 percent, against 14.25 percent.

The market opened with a cash balance of about 94.8 billion naira ($587.03 million) on Friday, traders said, but expected liquidity positions to improve next week as budget allocations to government agencies are credited to their bank accounts.

"We see rates falling next week because of the expected release of December budgetary allocation to government agencies later on Friday," one dealer said.

Nigeria, Africa's top energy producer distributes revenues from crude oil export to its three government tiers - federal, state and local - a portion of which filters through the banking system and helps provide liquidity for their operations.

Some dealers said a rate drop may likely occur earlier in next week but could climb later due to a planned auction of about 89.7 billion naira in 10-year bond on Wednesday by the Debt Management Office (DMO).

Source: Reuters (Reporting by Oludare Mayowa)

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