Interbank lending rates fall

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Lending rates eased to an average of 11% for the last week

Interbank lending rates eased more than 500 basis points, on Friday, to an average of 10.83 percent, compared with 16.33 percent last week, after a cash dispersal from the August budgetary allocation to government agencies hit the system.

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, state and local – providing liquidity to the banking system and determining lending rates.

Nigeria distributed N570 billion ($3.62 billion) from oil receipts to its three tiers of government last week, and traders said about half of the funds hit the system on Thursday, sinking the cost of borrowing among banks.

“We have a large volume of cash hitting the system from budget allocations on Thursday and rates have fallen more than 5 percentage points since then,” one dealer said.

Dealers said the market opened with a cash balance of about 317 billion naira ($2.01 billion) on Friday, compared with a negative balance of 42 billion naira last Friday.

The secured Open Buy Back (OBB) fell to 10.5 percent from 15.75 percent last week, 1.5 percentage lower than the central bank’s 12 percent benchmark rate and 50 basis points above the Standing Deposit Facility (SDF) rate.

Overnight placement and call closed at 11 percent apiece compared with 16.50 percent and 16.75 percent, respectively last week.

Dealers said rates should remain flat next week or inch up marginally because of inflows of additional funds from matured treasury bills.

“We see rates remaining flat or at most inching up a little next week because of more funds coming to the system from treasury bill maturities, unless the central bank embarks on a mop up exercise,” another dealer said.

Nigeria plans to issue 101.21 billion naira ($641.18 million) in treasury bills ranging from 3-month to 6-month maturities at its regular bi-monthly debt auction on Thursday.

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