Interbank Rate Rises On Decline Liquidity | Independent Newspapers Limited
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Interbank Rate Rises On Decline Liquidity

forex; naira, CURRENCY
Posted: Apr 25, 2016 at 3:50 am   /   by   /   comments (0)

Nigeria’s overnight interbank rate rose for the second consecutive week to an average of 6 percent on Friday from 4.5 percent penultimate week amid a drop in commercial lenders’ liquidity level on payment for treasury bills purchases, but rate seen falling this week on budgetary disbursal, reports Reuters.

The Central Bank of Nigeria (CBN) sold a total of N167.51 billion worth of debt with maturities ranging between three months and one year, while payment for the purchase is due on Friday.
Traders said the cost of borrowing among banks declined progressively last week from penultimate week’s close after the central bank asked commercial lenders to make provisions for foreign exchange purchases on Wednesday, and the fact that no cash was flowing into the banking system.
Traders said liquidity level stood around N232.85 billion on Thursday, down from N414 billion penultimate week.
“We expect that rate will decline to around 2-2.5 percent level this week in anticipation of the disbursal of budget allocations to government agencies,” one trader said.
Nigeria, Africa’s biggest economy, distributes revenue from its crude exports among its three tiers of government -federal, states and local – portion of states and local governments are expected to hit the banking system on Monday.
Traders said about N199 billion to N200 billion is expected to be injected into the banking system this week through budget allocation.
Traders said overnight lending was priced lower by fund takers because many of them had expected the injection of the budget cash on Friday, but resistance from major fund placers kept the rate at the prevailing level.
The interbank rate reflects the level of naira cash liquidity in the banking system.