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Interbank rates stay high on naira shortage

11 June 2012, 09:24

Lagos - Nigeria's interbank lending rates inched up slightly to an average of 14.50 percent this week, up from 14.25 percent last week, as banks funded their foreign exchange and treasury bills purchases, traders said on Friday.

Nigeria sold a total of 137.97 billion naira ($848.78 million) in treasury bills ranging from three months to one year at its bi-monthly auction, at higher yields than at the previous auction, while a total of $600 million was sold at the central bank's bi-weekly forex auction this week.

Traders said cash outflows to the purchases drained liquidity from the system, creating naira dearth and upswing in cost of borrowing among banks.

The market opened with a cash balance of about 10 billion naira ($61.52 million) on Friday, down from about 92 billion naira last Friday, traders said.

"The market has remained very tight because of lack of cash inflows," one dealer said.

The naira has been falling sharply against the dollar in recent weeks, but that has been driven largely by unmet strong dollar demand, rather than readily available naira liquidity.

The secured Open Buy Back (OBB) inched up to 14.25 percent, from 14 percent last week, 220 basis points above the central bank's 12 percent benchmark rate, and 4.25 percentage points above the Standing Deposit Facility (SDF) rate.

Overnight placement also closed at 14.50 percent, compared with 14.25 percent, while call money rose to 14.75 percent, from 14.50 percent last week.

"We see rates inching up further next week as the market becomes very tight until the disbursement of May budgetary allocations," another 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. That usually pushes down interbank rates.


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