Nigerian interbank rates fall to average of 0.75 pct on excess cash

Nigeria's interbank lending rates fell further to an average of 0.75 percent on Friday, down from 1 percent the previous day and from 3 percent a week ago, after the central bank made a large cash injection into the banking system.

Dada, Anchoria Investment boss

The cost of funds fell to 1 percent for overnight lending and 0.5 percent for the secured Open Buy Back (OBB) on Friday after additional cash in banks' deposits with the central bank were refunded on Friday.
Banking system credit opened at 1.20 trillion naira ($6.03 billion) on Friday, compared with 1.05 trillion on Thursday and 189 billion naira last week Friday.
The regulator has been injecting cash into the banking system in a bid to ease liquidity and stave off recession in Africa's biggest economy, which has suffered as oil prices fell.
"The market is very liquid and the central bank has refused to issue fresh open market operations (OMO) bills to mop up the excess liquidity in the system," one dealer said.
Traders said they expect system liquidity to drop marginally late on Friday after some banks transfer government revenue to the treasury single account (TSA) with the central bank before close of business.
Last month, liquidity dried up as authorities ordered commercial lenders to move government deposits into a single account at the central bank, part of anti-graft drive by President Mohammadu Buhari's new government.
The central bank then lowered cash reserve requirements (CRR) for lenders to 25 percent from 31 percent to loosen monetary policy while leaving its benchmark interest rate on hold at 13 percent.
The central bank injected about 740.8 billion naira in CRR refunds into the banking system on Thursday, forcing down the cost of borrowing among banks to a five-year low.
Traders said some commercial lenders were investing their surplus cash in fixed income assets to reduce their losses.
Nigeria plans to issue 80 billion naira of bonds with maturities between five and 10 years on Oct. 14.
But traders said the level of expected cash outflows into bond purchases would not be enough to reduce the impact of excess cash on the cost of borrowing among banks next week.
"Unless the central bank embarks on an aggressive mopping up exercise, we expect money market rates to remain at the present level," another dealer said.