Interbank rates flat on huge cash surplus

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Interbank rates flat on huge cash surplus
23 January 2010, 2:00 am

Nigerian interbank lending rates were flat at 2.14 percent on average this week, buoyed by fresh cash inflows and limited cash outflows due to a credit freeze in the banking sector, traders said on Friday.The secured Open Buy back (OBB) closed flat at 2.25 percent, below the central bank's 6.0 percent benchmark rate. Overnight and call were also unchanged at 2.50 percent as the system closed the week on a huge cash surplus.Nigeria, sub-Saharan Africa's second biggest economy, sold 93.5 billion naira ($631.6 million) worth of sovereign bonds and $500 million at its forex auction this week, but this did not significantly reduce liquidity in the system.Dealers said inflows of more budgetary allocations on Monday and repayment of matured treasury bills on Thursday further boosted liquidity in the system despite the outflows into forex and bonds purchases.Dealers said the market closed in excess of 360 billion naira surplus this week after payments for forex purchases and bonds were pulled out by the central bank."The credit freeze to the real sector meant that banks now concentrate more on overnight lending, which leaves the system in excess liquidity," one dealer said.Many of the lenders have since focused more on debt recovery and pay little attention to lending to the real sector.Rates are likely to remain unchanged next week because there is no major transaction expected to take out liquidity from the system, dealers said.

Source: Businessday :: News you can trust

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