Banks: Delay in budgetary allocations dry up liquidity

The inter-bank lending rates rose on Friday to an average of 14.83 per cent, from 14.50 per cent recorded the previous week, as a two- week delay in the disbursal of September budgetary allocations dried up liquidity.The disbursal of budgetary allocations from September oil revenues to the three tiers of government was due two weeks ago, but it has been held up by a row between the Central Bank of Nigeria and the government over the handling of the account.The delay, according to currency traders, is starving the banking system of liquidity.The Federal Government distributes oil funds from centrally held accounts every month to its three tiers of government (federal, states and local governments) which provides a much needed cash inflow to the banking system.The secured Open Buy Back rate was unchanged at 14 per cent, from 12 per cent the previous week, representing 200 basis points above the CBNs 12 per cent benchmark rate and 400 basis points above the Standing Deposit Facility rate.But overnight placement climbed to 15 per cent, from 14.50 per cent, while call money rose to 15.50 per cent, from 15 per cent the previous week.Traders said the market opened on Friday with a cash balance of N23.50bn ($147.29m), as foreign exchange and treasury bill purchases drained liquidity.Reuters quoted a dealer as saying, The market remains very tight because of the stalemate on the disbursement of budgetary allocation. We are expecting it to remain tight this week until the issue around the disbursal of September monthly allocations is resolved and cash is released.Indicative rates for the Nigeria Inter-bank Offered Rate also climbed in tandem with the short-end of the market, with the seven day funds closing at higher at 16.83 per cent from 16.04 per cent the previous week.Thirty-day funds rose to 17.29 per cent from 16.04 per cent, the 60-day increased to 17.66 per cent against 16.95 per cent, while the 90-day rose to 17.95 per cent from 17.37 per cent.
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