Inter-bank rates fall on liquidity increase

Inter-bank lending rates eased further last week to an average of 13 per cent, from 14.83 per cent the previous week. The development is due to surplus liquidity from the October budgetary disbursal and low cash outflows because of a two-day public holiday.Currency traders said the market opened on Friday with a cash balance of N214bn ($1.35bn), while additional inflows from lenders cash reserves requirements on Thursday further boosted liquidity to keep rates low.The Secured Open Buy Back fell to 12.50 per cent last week, from 14 per cent the previous week, representing 50 basis points above the Central Bank of nigerias 12 per cent benchmark rate and 250 basis points above the Standing Deposit Facility rate.Overnight placement fell to 13 per cent from 15 per cent, while call money dropped to 13.50 per cent, against 15.50 per cent previously.Reuters quoted a dealer as saying, "The market remained liquid from leftover cash from budget disbursal the previous week, while there were not many transactions in the market to drain cash from the system last week because of the public holiday."Dealers had earlier said that a disagreement over appropriate pricing might stall the sale of about N100bn in short-dated treasury bills in an open market operation by the CBN on Friday, and could help keep the system liquid and the rate stable this week.The CBN had proposed to sell about N100bn in short-dated treasury on Friday, but results had yet to be released to the market, due to what traders said was the unwillingness of the regulator to sell at rates quoted by banks, which it considered too high.Nigeria plans to sell N65bn ($410m) of 10-year bonds on November 16, its eleventh debt auction this year, while cash inflow to foreign exchange purchases at the bi-weekly auction could reduce liquidity in the system.Another dealer said, "We do not anticipate rapid increase in cost of borrowing next week (this week) despite the possible inflows to bonds, treasury bills and foreign exchange purchases," October budget inflow is around the corner."Indicative rates for the Nigeria Inter-bank Offered Rate closed lower to reflect prevailing liquidity in the market, with the seven day funds dropping to 14.20 per cent, from 17 per cent the previous week.Thirty-day funds fell to 15.16 per cent from 17.41 per cent, the 60-day eased to 15.62 per cent against 17.75 per cent, while the 90-day dropped to 15.95 per cent. from 18.04 per cent.
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