Nigerian interbank rates flat on high idle liquidity

First Bank Building

Nigerian interbank lending rates held steady at 10.25 percent across the board this week, the same as last week, with a high level of idle cash in the banking system and little impact from central bank measure to reduce it.
Traders said consistent retirement of matured treasury bills without corresponding issuance by the central bank to soak up the liquidity have kept rates at low levels.
The Open Buy Back (OBB) remained unchanged at 10.25 percent, 1.75 percentage points below the central bank's benchmark rate of 12 percent. The overnight placement and call money also traded at the 10.25 percent rate they closed at on last Friday.
"The system remains very liquid, and as long as the central bank is not aggressively mopping up excess liquidity from the system, rates will stay at the same level next week," one dealer said.
Attempts by the central bank to soak cash from the system through the Cash Reserves Requirement (CRR) on Wednesday resulted in net credit in favour of banks.
In March, the regulator increased the CRR on private sector deposits to 15 percent from 12 percent and retained public sector CRR at 50 percent to try to reduce the impact of excess cash on inflation, but liquidity has failed to tighten as yet.
The cash balance that lenders hold at the central bank opened on Friday at a surplus of 599 billion naira ($3.72 billion), underpinning the level of idle funds in the system.