Nigeria's interbank lending rates fell sharply to 8.25 percent on average this week from 40 percent last week after budgetary allocations to government agencies on Thursday raised liquidity levels in the money market.
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| Emefiele, CBN governor |
The cost of funds among commercial lenders rose sharply in the week to over 100 percent as state-owned energy firm NNPC recalled cash and commercial lenders scrambled to cover about 136 billion in short naira positions when the central bank sought to support the local currency.
The central bank directed commercial lenders early this month to pay for dollar purchases 48 hours in advance, seeking to curb foreign exchange demand and tighten liquidity in the banking system.
"The lending rate eased by Thursday when a portion of budget allocations to states and local governments hit the market ... (along) with additional funds from matured treasury bills repayment, providing liquidity relief for many banks," one dealer said.
NNPC, which sells dollars to commercial lenders monthly, started the usual withdrawal of a portion of the naira proceeds to deposit in its account with the central bank last week and continued earlier in the week, causing initial tight liquidity.
Dealers said the market is currently liquid enough, and expect it to remain so until next week, when banks must start putting all revenues from government agencies into one account at the central bank within 24 hours of receiving them.
This Treasury Single Account (TSA) is part of efforts by President Muhammadu Buhari to crack down on mismanagement of government funds.
The secured Open Buy Back (OBB) closed at 8 percent against 40 percent last week, while overnight placement was traded at 8.5 percent compared with 40 percent closed last week.
"We expect rates to open around 10 percent early next week until the movement of the budget allocation to the single account," another dealer said.
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