Tuesday, 05 June 2012 00:00

Nigeria’s interbank lending rates climbed by around 3.84 percentage points on the average this week to 14.25 percent, compared with 10.41 percent the previous week, as the central bank aggressively mopped up liquidity to curb inflation. The cost of borrowing among banks in top Africa’s energy producer fell last week after large budget allocations from centrally-held oil revenue accounts were disbursed to the three tiers of government, increasing liquidity in the market.

“Market liquidity has dropped significantly (since then) because the central bank has been aggressively mopping up funds from the system with the conduct of open market operations (OMO),” one dealer said.
Traders said the central bank mopped-up around 200 billion naira ($1.25 billion) using treasury bills for OMO, creating cash shortage and rate spike.
The market opened with a cash balance of about 92 billion naira on Friday, compared with 387 billion naira balance last Friday.

The secured Open Buy Back (OBB) jumped to 14 percent, from 10.25 percent last week, 200 basis points above the central bank’s 12 percent benchmark rate, and 4 percentage points above the Standing Deposit Facility (SDF) rate.
Overnight placement also climbed to 14.25 percent, from 10.5 percent, while call money rose to 14.50 percent, compared with 10.5 percent last week.
“We see the overnight rate climbing as high as 15 percent next week as the central bank continues with its aggressive mopping up exercise, coupled with funding for foreign exchange and treasury bills sales at the primary auction,” another trader said.

Nigeria plans to issue 137.97 billion naira ($862.58 million) in treasury bills ranging from 3-month to 1-year maturities at its regular bi-monthly debt auction on June 7. ($1 = 159.95 naira)
However, Nigeria plans to issue 137.97 billion naira ($862.58 million) in treasury bills ranging from 3-month to 1-year maturities at its regular bi-monthly debt auction on June 7, the central bank said on Friday.

The bank plans to issue 32.97 billion naira in 91-day paper, 45 billion naira in 182-day bills and 60 billion in 364-day bills this week on Wednesday.
Nigeria, Africa’s second biggest economy after South Africa, issues treasury bills regularly to reduce money supply, curb inflation and help lenders manage their liquidity.
The short-dated debt of Africa’s top energy producer attracted higher yields across the board at the last auction on May 23 compared with the one earlier, due to concerns on rising inflation.