Liquidity remains tight as inter-bank rates drop

Nter-bank lending rates eased slightly last week to an average of 16 per cent from 16.5 per cent previously as cash from budget allocations penultimate Friday helped soften liquidity pressure in the market.Currency traders said funding for foreign exchange and treasury bills purchases had drained cash from the system and countered that move somewhat.Reuters quoted a dealer as saying, The market was short by about N36.70bn when we opened for business last Friday, which was better than about N106.83bn deficit the previous Friday.Dealers said a surplus balance because of the budget inflow had been eased by the CBN intensifying a liquidity mop-up exercise through its Open Market Operation.Foreign exchange and treasury bills purchase also caused the liquidity level in the system to drop toward the end of the week.The Secured Open Buy Back was unchanged at 15 per cent, representing 300 basis points above the Central Bank of Nigerias 12 per cent benchmark rate and 700 basis points above the Standing Deposit Facility rate.Overnight placement dropped marginally to 16.75 per cent from 17 per cent, while call money closed at 17 per cent compared with 17.50 per cent last week.Meanwhile, Nigeria sold N125.09bn in short-dated treasury bills at an auction on Thursday, while it sold $400m at its bi-weekly foreign exchange auction and more than N100bn in secondary market treasury bills at the OMO auction this week.Another trader was quoted as saying, The market will remain tight next week (this week) and rates inch up gradually unless there is a major cash inflow to ease liquidity pressure.Indicative rates for the Nigeria Inter-bank Offered rate closed lower, pricing in expectations of possible cash inflows from the disbursal from the governments excess crude account and personnel costs next week. The seven day funds eased to 17 per cent, from 18.77 per cent last week. Thirty-day funds closed lower at 17.29 per cent against 19 per cent, the 60-day closed at 17.66 per cent against 19.25 per cent, while the 90-day dropped to 17.83 per cent from 19.45 per cent.
Click here to read full news..