Nigerian interbank
lending rates jumped to 10.41 per cent on average last week from 9.25
per cent the previous week as the market adjusted to a 100 basis point
hike in the central bank’s key interest rate, traders said on Friday.
The central bank on
Tuesday raised its benchmark interest rate to 7.5 per cent in a bid to
ward off the effect of rising government spending ahead of elections
next month, prompting market rates to rise across the board.
The secured Open
Buy Back (OBB) rose to 9.50 per cent from 8.50 per cent, 200 basis
points above the central bank’s 7.50 per cent benchmark rate and 4.5
per centage points higher than the Standing Deposit Facility (SDF) rate.
Overnight placement rose to 10.75 per cent from 9.25 per cent, while call money climbed to 11 per cent from 10 per cent.
Negative balance
Dealers said the
market was in negative balance despite the inflow of about 90 billion
naira for public sector personnel costs on Tuesday as cash outflows to
foreign exchange and treasury bills drained liquidity from the system.
“The market reacted
to the 100 basis point hike in the central bank’s interest rate, while
we had a number of large cash outflows that also drained liquidity in
the system,” one dealer said.
Traders said the
market was already in a repo, meaning some banks may have to resort to
borrowing from the central bank’s window or depend more on the
interbank market for the better part of next week to fund their
operations.
Reduce liquidity
Nigeria sold $800 million at its bi-weekly foreign exchange auction
this week and 77.49 billion naira in 91-day and 182-day bills, helping
to reduce liquidity in the system and pushing up banks’ borrowing costs.
Traders said the
interbank rate should rise further next week as the state-run energy
firm NNPC (Nigeria National Petroleum Corporation) could transfer some
deposits from banks to its account with the central bank, as it tends
to do each month.
The indicative
rates for the Nigeria Interbank Offer Rate (NIBOR) closed higher with
the 7-day funds rate rising to 11.45 per cent from 9.83 per cent.
The 30-day fund climbed to 12.58 per cent from 11.04 per cent, the
60-day traded at 13.11 per cent, from 11.79 per cent, while the 90-day
was up at 13.85 per cent, from 12.62 per cent last week.
