Interbank rates up on low cash, NNPC withdrawal

[Punch]

Nigeria's interbank lending rates climbed marginally this week to an average of 14.50 percent, compared with 14.33 per cent last week, after the Nigerian National Petroleum Corporation recalled a portion of its deposits with banks, draining liquidity from the system.

NNPC, a major dollar supplier to the interbank market, sold about $800 million to some banks this week and has gradually transferred the naira proceeds to its account with the Central Bank of Nigeria, putting pressure on the liquidity level in the market.

"The market opened on a deficit note on Friday, with cash balance at N2.89 billion ($18.39 million) negative, causing spike in rates," one dealer said.

Traders said though there was inflow of about N70 billion from matured treasury bills repayment on Thursday, it was not enough to lower cost of borrowing among banks.

"We expect that rate will ease a little next week because of the possible release of March budgetary allocations to government agencies, but that might be countered by large offering of debt instruments by Central Bank of Nigeria and Debt Management Office," another dealer said.

Nigeria plans to issue N140.61 billion ($894.86 million) in treasury bills ranging from 3-month to 1-year maturities at its regular monthly debt auction next week, while the DMO announced plan to raise N90 billion from debt auction.

Dealers said demand from investors could be strong at the two auctions next week due to the amount on offer, while cash flows to the debt instrument purchases and other transactions could minimise the impact of possible budgetary disbursal on cost of borrowing.

The secured Open Buy Back fell to 14 per cent, from 14.50 per cent last week, due to the impact of repaid matured treasury bill. OBB was 200 basis points above the CBN's 12 per cent benchmark rate, and 400 percentage points above the Standing Deposit Facility rate.

Overnight placement was down to 14.50 per cent from 15.25 per cent, while call money traded at 15 percent, lower than the 15.50 per cent last week.



The Punch