Nigerian interbank rates up on NNPC cash withdrawal

Nigerian interbank lending rates rose more than 80 basis points this week to an average of 11.41 percent, compared with 10.58 percent last week, as cash outflows to treasury bill sales and a withdrawal by the state-owned energy company drained liquidity.

Dealers said central bank has been selling treasury bills through open market operations (OMO) and a primary market auction (PMA) this week.

“The market liquidity has dropped because of cash outflows to OMO auction, (state oil firm) the NNPC withdrawal and foreign exchange purchases, with cost of borrowing marginally up in the week,” one dealer said.

The NNPC sells bulk of dollars traded on the interbank foreign exchange market, and then usually recalls a portion of the proceeds to its account with the central bank to fulfil its obligations to the government.

Dealers said the market opened with a positive cash balance of about 129 billion naira ($820.40 million), compared with a cash balance of 375 billion naira last Friday.

The secured Open Buy Back (OBB) inched up to 11 percent, compared with 10.25 percent last week, 100 basis points lower than the central bank’s 12 percent benchmark rate, and 100 basis points above the Standing Deposit Facility (SDF) rate.

Overnight placement traded at 11.25 percent, up from 10.50 percent, while call money rose to 12 percent, compared with 10.50 percent last week.

“We see rates inching up further next week if the central bank continue the conduct of its OMO and NNPC recall some more cash from the system,” another dealer said.

Nigeria sold 171.83 billion naira ($1.09 bln) in treasury bills with maturities ranging from three months to 1-year, the central bank said on Thursday, and yields were up 30 basis points compared with rates at the previous auction. ($1 = 157.24 naira) (Reporting by Oludare Mayowa; Editing by Tim Cocks)

Source: Reuters