Nigeria interbank rates ease before government funds reach banks

CBN Gov, Emefiele

Nigerian interbank lending rates eased to an average of 10.37 percent on Friday, down from 10.87 percent last week, in anticipation of an increase in liquidity as the government makes its monthly budgetary allocations.
Nigeria allocates oil revenues to federal, state and local governments every month. The money going to states and local government are distributed by banks. The funds are expected to reach the market by Monday, traders said.
Traders said the cash balance banks hold at the central bank dropped to a surplus of 297 billion naira ($1.82 billion) on Friday from 349 billion naira last week, as state-owned energy company NNPC withdrew money from the banking system.
"The sale of treasury bills this week drained liquidity from the system," one dealer said, but rates should be unchanged next week because of the budget allocation.
NNPC sold $200 million to some lenders last week but withdrew the naira proceeds to its account with the central bank this week. Nigeria also sold treasury bills this week.
The open buy-back (OBB) eased to 10.25 percent from 10.75 percent, 1.75 percentage points below the central bank's benchmark rate of 12 percent. Overnight placement fell to 10.5 percent from 11 percent last week.