CBN issues directives on foreign loan repayment... As interbank rates rise to 14.66%

THE Central Bank of Nigeria (CBN) has issued fresh directives on foreign loan repayment for the Nigerian foreign exchange market.In a circular signed by the Director, Trade and Exchange Department, CBN, Batari Musa, addressed to all authou-rised dealers, the apex bank directed that henceforth, repayment of principal and interest payment on loan contracted for the purpose of raw materials, plants and machinery could only be funded from Wholesale Dutch Auction System (WDAS).It clarified that foreign loan for other purposes, repayment and interest payment should be sourced from the interbank market, adding that ancillary charges arising from contracting foreign loans would be with interbank funds.To avoid sanctions, the apex bank advised all authorised dealers to ensure that transactions were supported and met all documentation before effecting remittance.Meanwhile, the interbank lending rates rose to an average of 14.66 per cent, from 14.16 per cent the previous week, as cash outflows to bonds and dollar purchases drained liquidity in the market further, traders said on Friday.The Central Bank of Nigeria (CBN) sold N70 billion worth of five-year and 10-year bonds maturing in 2017 and 2022 at its regular auction on Wednesday, while a total of $350 million was sold at the bi-weekly foreign exchange auction last week.'The market is short. That was the reason rates went up slightly higher this week ... but the inflow of about N71 billion on Friday in cash call to joint venture oil producing partners helped calm the market a little today (Friday),' one dealer said.The secured Open Buy Back (OBB) was unchanged at 14 per cent, 200 basis points above the CBN's 12 per cent benchmark rate, and four per cent points above the Standing Deposit Facility (SDF) rate.
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