Interbank Lending Rates Soar

Nigerian interbank lending rates climbed to an average of 8.25 per cent this week, from 5.0 per cent last week, due to large cash outflows which drained liquidity from the system, traders said on Friday.

Traders said rates may ease next week because of anticipated cash inflows from matured treasury bills and sundry payments from the treasury.

The secured Open Buy Back (OBB) rose to 8.0 percent from 4.50 per cent last week, 175 basis points above the central bank’s 6.25 per cent benchmark rate and 3.75 percentage point above the Standing Deposit Facility (SDF) rate.

Overnight funds inched up to 8.25 per cent from 5.00 percent, while call money closed at 8.50 per cent from 5.5 per cent.

“There was a treasury bill auction this week, which took out over 100 billion naira from the system and reduced liquidity, causing rates to climb,” one dealer said.

Traders said the market opened with liquidity of about 58.6 billion naira in their accounts with the central bank on Friday, but said expected inflows from matured treasury bills next week could boost liquidity and force down the cost of borrowing among banks.

The market will close on Monday and Tuesday for a public holiday and will open again on Wednesday, according to Reuters.