Interbank Lending Rates Rise On NNPC Cash Recall, T-bills Auction

Nigerian interbank lending rates rose by about 100 basis points this week, to an average of 12.5 per cent, as dollar sales by the state-owned energy firm NNPC and treasury bills sapped naira liquidity.

The NNPC sells the bulk of dollars traded on the interbank forex market and then usually recalls a portion of the proceeds to its account with the central bank.

The energy company recalled a portion of the naira proceeds of $450 million sold to some lenders this week, draining liquidity in the market and putting pressure on the cost of borrowing, traders said.

Dealers said the central bank also sold treasury bills in both the primary and secondary markets to mop-up excess cash, which further tightened liquidity in the system.

The secured Open Buy Back (OBB) rate rose to 12 per cent from 11.25 per cent it opened on Monday, hitting the same level as central bank’s benchmark rate.

The overnight placement jumped to 12.5 per cent from 11.5 per cent, while call money rose to 13 per cent from 11.75 per cent on Monday.

The central bank sold 166.39 billion naira ($1 billion) worth of treasury bills with maturities ranging from three months to one year at its primary auction last week, and an unspecified amount of bills using open market operations (OMO).

The market opened with a cash balance of about 119 billion naira on Friday, compared with more than 300 billion naira the previous week.

“We see rates probably hovering around 12-13 per cent on average next week(this week)? because of an expected cash outflow to foreign exchange and OMO bills, but they could ease toward the end of the week on budgetary allocations to government agencies,” one dealer said.

The 7-day rate closed at 12.95 per cent, compared with 11.91 per cent on Monday.

The 30-day rate was up to 13.62 per cent from 13.25 per cent, 60-day was 13.83 per cent from 11.62 per cent, while 90-day stood at 14.25 per cent from 14.04 per cent previously.