Inter-bank rates rise on forex, bond sales

Inter-bank lending rates climbed to an average of 15.50 per cent last week, from 13 per cent the previous week after foreign exchange, bonds and treasury bills purchases drained liquidity in the system.Currency dealers said liquidity in the system receded drastically last week with the market opening last Friday with a cash balance of N84bn ($529.63m) from about N214bn the previous week.Reutersquoted a dealer as saying, The Central Bank of Nigeria was consistent in conducting open market operations during the week in an effort to mop up perceived excess liquidity in the system, while forex and bonds purchases further drained cash from the system and led to an increase in the cost of borrowing in the market.Another dealer said, We see cost of borrowing in the market gradually easing next week because we are expecting that FAAC-Federation Account Allocations Committee - will meet and disburse funds to the three tiers of government.The Secured Open Buy Back rose to 14 per cent from 12.50 per cent last week, representing 200 basis points above the CBNs 12 per cent benchmark rate and 400 basis points above the Standing Deposit Facility rate.Overnight placement climbed by 16 per cent, from 13 per cent, while call money rose to 16.50 per cent against 13.50 per cent previously.Some dealers said the Nigerian National Petroleum Corporation also transferred a portion of its deposit with some banks to its account with the CBN last week, further draining liquidity in the system.The Federal Government sold N65bn in 10-year sovereign bonds last week, while the CBN sold about $583m at the bi-weekly foreign exchange auction, aside its regular direct dollar sales to some lenders.FG distributes oil funds from centrally held accounts every month to its three tiers of governmentfederal, states and local, which provides a much needed cash inflow to the banking system.Funds from October revenue have yet to be distributed and when this is done, the system will experience increased cash with rate dropping.Indicative rates for the Nigeria Inter-bank Offered Rate closed higher in tandem with short-end of the market, with the seven day funds climbing to 17.25 per cent, from 14.20 per cent recorded the previous week.Thirty-day funds rose to 17.50 per cent from 15.16 per cent, the 60-day closed at 17.75 per cent against 15.62 per cent, while the 90-day jumped to 18.08 per cent from 15.95 per cent.
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