Cost of borrowing rises atinterbank market

Despite Central Bank of Nigeria (CBN)s efforts at creating liquidity in the financial system, large cash outflows to treasury bills purchased on both primary and secondary markets drained funds and pushed up the cost of borrowing among banks last week.There was an inflow of about N180 billion refund on banks Cash Reserve Requirement (CRR) by the CBN last week, but its impact was little on transactions, one dealer said.Dealers said there was a restriction on how the fund should be utilised by the beneficiary banks, limiting its impact on the cost of funds in the market.The apex bank sold N130 billion ($840 million in 91, 182 and 364-day treasury bills on Thursday as part of measures to control money supply in the economy and sold $650 million at its bi-weekly forex auction.The market opened last Friday with a balance of about N116.41 billion in banks accounts with the CBN, but the bulk was the refund from CRR, which dealers said could not be used in major transactions.We expect rates to start falling once funds from budgetary allocations hit the system latest by Tuesday, another dealer said.The Federal Govern-ment approved the disbursement of N413.3 billion from its central accounts to its three tiers of government on Friday, and traders said half of the money should pass through banking systems and help ease liquidity.
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