Nigerian interbank rates fall 300 bps on liquidity surge

Nigerian interbank lending rates fell sharply on Friday after the government's January revenues went into the banking system and as uncertainty over the suspension of the central bank governor kept traders cautious.
Rates eased to 11 percent across the board, down three percentage points from last week.

Ag CBN Governor, Alade

Investors sold government bonds and the naira after President Goodluck Jonathan suspended Central Bank Governor Lamido Sanusi on Thursday. Central bank intervention has since steadied the naira and local pension fund managers have been buying bonds.    
Sanusi, an outspoken critic of corruption in Africa's top oil producer, told Reuters on Friday he would go to court to challenge his suspension, saying that though he does not want his job back, he wants to show that the move was illegal.
Dealers said around 260 billion naira ($1.58 billion) belonging to states and local governments hit the banking system on Monday, pushing down the cost of interbank borrowing.
The cash balance that lenders hold at the central bank opened at 340 billion naira on Friday, higher than 232 billion naira a week ago.
Africa's second biggest economy distributes revenues from oil earnings among its three tiers of government, with the portions due to states and local governments going through the banking system.
The secured open buy back (OBB) rate eased to 11 percent, 100 basis points below central bank's benchmark rate of 12 percent, as against 14 percent last week.
Both overnight placement and call money closed lower at 11 percent, compared with 14 percent last Friday.
Dealers said the direction of lending rates next week will depend on what steps the central bank takes to restore confidence to financial markets.