The planned strike by organised labour is already reverberating across the financial markets as interbank lending rates dropped further last week while the naira closed weaker at the interank foreign exchange market on Friday, at 162.10 to the dollar, 1.32 percent weaker than the 159.95 to the dollar Thursday close.
The interbank lending rate dropped to 13.50 percent from 14.08 percent the previous week as the market assumed a cautious position, with traders gearing up for the impending industrial action. The foreign exchange market, opened trading with a cash balance of about N290.64 billion ($1.82 billion), compared with a balance of about 168.58 billion naira last Friday.
The secured open buy back (OBB) rate eased to 13 percent from 13.75 percent last week, 100 basis points above the central bank’s 12 percent benchmark rate and 3.00 percentage points above the standing deposit facility rate, while overnight placement fell to 13.50 percent, from 14 percent, the previous week, while call money dropped to 14 percent, against 14.50 percent.
According to reports monitored by Reuters, rates were low because of prevalent liquidity in the system. Traders said the central bank sold about 81 billion naira in treasury bills this week, but its effect was minimal on the cost of borrowing among banks. “The central bank seems to be aggressive in its efforts to tighten liquidity in the system, so we see rates trending higher next week as liquidity recedes due to treasury bills issuance, foreign exchange purchases and other transactions,” a dealer told Reuters.