Nigerian inter-bank rates stay low on excess cash

[bayo4luv]

Nigerian inter-bank lending rates were stable at record lows last week after additional funds from the country's windfall oil savings were disbursed to government agencies, dealers said weekend.   

The secured Open Buy Back (OBB) was flat at 1.10 percent, 10 basis points above the central bank's Standing Deposit Facility (SDF) rate, but well below the bank's 6.0 percent benchmark interest rate. Overnight placement and call money were also stable at 1.20 percent and 1.25 percent, respectively.   

About N79 billion ($532.7 billion), part of the planned $1 billion disbursal from the windfall oil savings, finally hit the system on Tuesday. This further swelled liquidity with few alternative investment outlets, traders said.   

"The market has (an) over N600 billion deposit balance with the central bank as of Thursday, while the idle portion was about N158 billion," one dealer said.   

Traders said despite the sale of $307.77 million at the central bank's bi-weekly forex auction and N40 billion in 91-day and 182-day treasury bills, there was still enough liquidity to meet all obligations. "Not much is happening in the market as most banks merely place their idle cash with the central bank, given the fact that there is no other alternative source of investment," another dealer said.   Nigerian banks depend largely on the cyclical release of funds from the central account to the three tiers of government — federal, state and local — for their operations.   

But a credit freeze has forced many of the banks to deposit their surplus cash with the central bank despite the cut in the SDF by 100 basis points to 1.0 percent last month.   Traders said the rates will stay relatively stable as the market is expected to remain liquid in the short-term.

Nigerian inter-bank rates stay low on excess cash

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