Nigerian overnight lending rate falls sharply on increased liquidity

Nigerian overnight lending rates fell to 8.25 percent on Friday, from 25 percent last week after monthly payments of budget allocations to government agencies and proceeds of cash call by joint crude-oil production partners.
Traders said about 256 billion naira ($1.26 billion) in January budget allocations was injected into the system on Thursday, while 60 billion naira from the cash call entered the market this week, forcing down borrowing cost among banks.
Before the drop, lending rates hovered between 20 percent to 40 percent at the beginning of the week, owing to cash squeeze.
Banks' cash balance with the central bank stood at around 400 billion naira credit on Friday compared with 4.8 billion naira credit last week, traders said.
The secured Open Buy Back (OBB) closed at 8 percent, compared with 25 percent closed last week. The secured fund was 5 percentage points below the central bank's 13 percent benchmark interest rate.
The central bank withdrew 11 billion naira from lenders this week to meet its cash reserves requirement to keep liquidity tight, but monies from government disbursement meant that the banking system awash with funds, dealers said.