Nigerian interbank rate crashes to 1.8 pct, market liquidity hits 500 bln naira on debt repayment

Nigeria's overnight lending rate crashed to 1.8 percent on the interbank on Thursday after the central bank injected 340 billion naira in matured treasury bill into the money market, swelling liquidity positions of many commercial lenders, traders said.

The central bank on behalf of the Debt Management Office (DMO) repay 131.4 billion naira worth of matured treasury bills to investors, while the balance came from the open market operations bills.

The debt office had said it will not roll over treasury bills which are due to mature this month in line with government plans to refinance domestic debt with foreign borrowing.

Consequently, cost of borrowing among commercial lenders fell sharply to more than five years low as market liquidity shot up to around 500 billion. 

Traders said no single transaction has been booked on the interbank market because many banks have enough liquidity to cover their positions.

The debt office is also expected to repay more maturing treasury bills ob December 21, which will further raise the level of liquidity in the money market.

Yields on treasury bills held up across the board at around 10 percent on Thursday. They fell to 7 percent after the repayment plan was announced this week.
Meanwhile, the debt office sold 108.66 billion naira worth of naira-denominated bonds maturing in 2021 and 2027 at an auction on Wednesday.
It issued 50 billion naira of 2021 debt at 13.19 percent, from 14.79 percent at the previous auction in November. The same tenor bond closed at 13.11 percent on the secondary market on Wednesday.
A total of 58.66 billion naira worth of the benchmark bond maturing in 2027 was issued at 13.21 percent, compared with 14.8 percent in November. The 2027 paper closed at 13.23 percent on the secondary market on Wednesday.