Interbank rate drops as market liquidity surges

The nation’s interbank overnight rate fell to five per cent on Friday from 15 per cent a week ago, as cash from maturing treasury bills and payments by the government to contractors helped boost liquidity.

The increased cash flow left the money market with a N267.10bn surplus balance on Friday, reversing the N300bn shortfall of a week ago and pushing down the cost of borrowing among commercial lenders, according to Reuters.

“There was repayment of about N115.03bn in matured treasury bills at the Open Market Operations on Thursday, while the release of an unspecified amount of cash payment to government contractors also boosted system liquidity,” one dealer said. Many banks had approached the central bank’s discount window to borrow short-term cash last week to enable them meet obligations and ease liquidity pressures, traders said.Traders said the expected release of capital spending by the federal government to reinflate the economy should inject more cash into the money market in the coming days, which should impact positively on the interbank rate.

[Punch]

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