Interest rates to rise this week as CBN implements 15% CRR

Interest rates at the money market are expected to rise this week following anticipated pressure on system liquidity ahead of the implementation of the new 15% CRR on private sector funds by the Central Bank of Nigeria (CBN).

In addition, there is an expectation of mop up of excess financial system li¬quidity via Open Market Operation (OMO), culminating to upward pressure on inter-bank rates, analysts at Cowry Asset Management Limited said.

However, treasury bills worth N174.73 billion will mature this week via Open Market Operations and will consist of 132-day bills worth N47.65 billion; 161-day bills worth N59.92 billion; and 168-day bills worth N67.16 billion.

Nigerian Inter-Bank Offered Rates steadied for all placement tenors despite boost in financial system liquidity. Treasury bills worth N266.81 billion matured via both OMO and primary market. The maturities consisted of 91-day bills worth N21.54 billion; 105-day bills worth N11.29 billion; 111-day bills worth N40.59 billion; 114-day bills worth N6.02 billion; 126-day bills worth N53.47 billion; 175-day bills worth N100.12 billion; and 182-day bills worth N33.78 billion.

Also, the CBN auctioned bills worth N105.32 billion (via OMO and PMA) which include 91-day bills worth N21.54 billion (marginal rate (MR) dropped to 11.9% from 11.95%); 182-day bills worth N33.78 billion (MR fell to 13.18% from 13.25%) and 147-day bills worth N50.00 billion. The inflows exceeded outflows, howbeit, NIBOR for call, 30 days, 60 days and 90 days steadied to 10.75%, 11.37%, 11.71%, and 11.96%, respectively, while only the 7 days NIBOR moderated week-on-week to 10.96% (from 11.00%).

Meanwhile, the nation’s currency, the naira, is expected to stabilise this week as the monetary authority is ardent on its policies.

The naira has dropped 2.8 percent against the dollar on the inter-bank market since this year. Naira on Friday weakened against the US dollar losing N0.07k at the inter-bank market as it closed at N165.06/$ compared to N164.99/$ the previous day, data at Financial Market Dealers Quotations (FMDQ) have revealed.

Last week, the CBN offered USD800.00 million but sold USD799.09 million (0.84% more than the preceding week’s sale) to authorised dealers at its bi-weekly Retail Dutch Auction. As a result, the official NGN/USD exchange rate steadied at N155.74/USD, Cowry Assets Management Limited, said in a report.

However, the naira depreciated against the greenback in all other market segments – the naira fell by 0.01% (or N0.02), 0.29% (or N0.50) and 0.58% (or N1.00) to N164.90/USD, N171.00/USD and N173.00/USD at the inter-bank market, the bureau de change and the parallel (or ‘black’) market, respectively. The depreciation in the alternative markets may be partly attributed to the failure to release cash to BDCs on Wednesday (eventually paid on Thursday) due to the fire incident at CBN Lagos office.