Nigerian interbank rates fall on ample liquidity

Nigeria’s interbank lending rate eased to an average of 4.5 percent on Friday, its lowest since the central bank raised its benchmark interest rate to 13 percent last December and down from 6 percent last week.

Traders said banking liquidity was boosted by the injection of about 260 billion naira ($1.3 billion) in matured Treasury bills and a net credit in cash reserves of about 45 billion naira being put into the system on Thursday by the central bank.

“Beside the mopping up of about 172.8 billion naira by the central bank through open market operation bills in the week, the injection of large matured Treasury bills helped counter the impact of the mop up, boost liquidity in the market and forced down the cost of borrowing in the interbank,” one dealer said.

Traders said many banks were not taking money from the interbank market because most commercial lenders have cash to support their transactions.

The banks’ credit balance with the central bank rose to 390 billion naira from 324 billion balance last week, traders said.

“We see lending rates inching up gradually next week as liquidity thins out because of the likely effect of primary Treasury bills auction on Wednesday and outflows to other transactions,” another dealer said.

The secured open buy back (OBB) declined to 4 percent from 6 percent last week. The OBB was 9 percentage points below the central bank lending rate of 13 percent. The overnight cash placement rate fell to 5 percent, against 6 percent last week.