Interbank’s Rates Ease On Cash Flows

The nation’s interbank
lending rates fell sharply to 8.25 per cent  on average  this past week from 40 per cent to last week after budgetary allocations  to government agencies raised  liquidity in the  money market.
The cost of funds among commercial  lenders rose sharply in the week to over 100 per cent as the Nigerian National Petroleum Corporation (NNPC) recalled cash and commercial  lenders scrambled to cover about N36 billion in positions when the Central Bank of Nigeria  (CBN) sought to support the local currency.
The CBN had last month directed banks to pay for dollar purchases  48 hours in advance, seeking to curb foreign exchange demand and tighten  liquidity in the banking system.
“The lending rate eased by last Thursday when a portion of budget allocations to states and local governments hit the market along  with additional funds from  mature treasury bills repayment, providing liquidity  relief for many banks” one dealer told our correspondent.
The NNPC which sells dollars to commercial lenders monthly started the usual withdrawals of a portion of the naira proceeds to deposit in its account with the CBN last week  and continued  causing initial tight liquidity.
Dealers said the market is currently liquid enough and expected it to remain  so until next week when banks  must start  putting all  revenues  from government agencies into one  account  at the CBN within 24 hours of receiving them.
The Treasury Single Account, (TSA) is part of efforts by President Muhammadu Buhari to crack down on mismanagement of government funds.
The secured  open buy back closed  at 8  per cent against  40 per cent last week while overnight placement was traded at 8.5 per cent compared with 40 per cent last week.
“We expect rates to open around 10 per cent early next week until the movement of the budget allocation to single account” another dealer in Port Harcourt told  our source.
The Head, Research and Investment, Afrinvest  West Africa, a research and investment advisory firm, Mr. Ayodeji Ebo, said the movement of the TSA policy and activities  in the market  would determine the interbank rate over the coming weeks.