Naira: Inter-bank rates rise to 14.5%

The inter-bank lending rates for Deposit Money Banks in Nigeria rose from 13.5 per cent to an average of 14.5 per cent on Friday.The rates fell at the close of the week when some of the formerly rescued DMBs sold a portion of their bond holdings to get cash for their operations.Reuters reported that the cost of borrowing among banks eased last week after it initially surged to an average of 17.16 per cent following the Central Bank of Nigeria benchmark interest rate hike.The Monetary Policy Committee of the CBN during its October 10, 2011 emergency meeting, had raised the Monetary Policy Rate, otherwise called interest rates, by 275 basis points, from 9.25 to 12 per cent.The secured Open Buy Back rose to 14 per cent from 12 per cent last week, representing 200 basis points above the apex banks 12 per cent benchmark rate and 400 basis points above the Standing Deposit Facility rate.Also, there was appreciation in the overnight placement, as it climbed to 14.50 per cent from 14 per cent, while call money rose to 15 per cent from 14.50 per cent the preceding week.Reutersquoted traders as saying that the market opened on Friday with a cash balance of N172.72bn ($1.08bn) as bonds and foreign exchange purchases ate deep into market liquidity during the week.The Federal Government had sold N55.67bn ($354bn) in three, five and 10-year sovereign bonds on Wednesday, at its tenth monthly debt auction of the year.The Debt Management Office said yields on the instruments broadly rose to reflect the hike in the CBNs benchmark interest.We expect rates to remain at the same level next week until budget allocations start coming in to provide more liquidity and help push rates down, a dealer said.The inflow of cash into the countrys financial system from the budgets has been delayed for the month of September, following unsettled concerns between the states and the Federal Government as to how revenue generated from oil export would be judiciously distributed.Meanwhile, indicative rates for the Nigeria inter-bank offered rate rose, reflecting the increase at the short-end of the market with the seven-day funds closing at 16.04 per cent contrasting 15.50 per cent recorded in the preceding week.The 30-day funds however, fell to 16.04 per cent from 16.50 per cent, while the 60-day dropped to 16.95 per cent from 17.45 per cent, and the 90-day relaxed to 17.37 per cent against 17.75 per cent.
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