Nigeria Interbank Rates Ease On Oil Cash Inflow

Nigeria’s interbank lending rates fell further this week to an average of 14.25 percent compared to last week’s 14.41 percent after additional cash inflows from the excess crude account disbursal hit the market on Wednesday, traders said on Friday.

“About 102 billion naira ($648.03 million) came into the system from the excess crude account on Wednesday, boosting the liquidity level and help push down the cost of borrowing in the interbank,” one dealer said.

Africa’s top crude-oil exporter shares proceeds from oil sales from a centrally held account every month to its three tiers of government – federal, states and local – providing liquidity to the banking system and impacting on lending rates.

Traders said rates would have been lower but for the outflows into treasury bills sales at the open market operation and withdrawal by state-owned energy company NNPC, which drained liquidity from the system in the week, reuters report.

The market opened with a cash balance of about 67 billion naira on Friday, reflecting gradual drain in liquidity in the system after the NNPC cash withdrawal.

NNPC sold about $450 million to some lenders this week, and was recalling a portion of the naira proceeds to its account with the central bank as part of statutory requirement and move to reduce excess liquidity in the system.

Traders said cost of borrowing among banks should inches up next week because of further withdrawal by the state energy company and outflows into foreign exchange purchase.

“Since we are not expecting any further cash inflow next week, rates should climb because the market will be tight as a result of additional NNPC withdrawal and outflows into foreign exchange auction,” another dealer said.

The secured Open Buy Back (OBB) eased to 13.75 percent, from 14 percent last week, 175 basis points above the central bank’s 12 percent benchmark rate, and 3.75 percentage points above the Standing Deposit Facility (SDF) rate. Overnight placement dropped to 14.24 percent from 14.5 percent, while call money traded at unchanged at 14.75 percent.