Inter-bank rates fall

Inter-bank lending rates eased more than 500 basis points on Friday to an average of 10.83 per cent, compared with 16.33 per cent recorded the previous week, after a cash dispersal from the August budgetary allocation to government agencies hit the system.

A total of N570bn ($3.62bn) was distributed from oil receipts to the three tiers of government last week, and traders said about half of the funds hit the system on Thursday, sinking the cost of borrowing among banks.

The government shares proceeds from oil sales from a centrally held account every month among the three tiers of government – federal, state and local – providing liquidity to the banking system and determining lending rates.

Reuters quoted a dealer as saying, “We have a large volume of cash hitting the system from budget allocations on Thursday and rates have fallen more than five percentage points since then.”

Dealers said the market opened with a cash balance of about N317bn ($2.01bn) on Friday, compared with a negative balance of N42bn last Friday.

The secured Open Buy Back fell to 10.5 per cent from 15.75 per cent the previous week, 1.5 percentage lower than the Central Bank of Nigeria’s 12 per cent benchmark rate and 50 basis points above the Standing Deposit Facility rate.

Overnight placement and call closed at 11 per cent apiece compared with 16.50 per cent and 16.75 per cent, respectively the previous week.

Dealers said rates should remain flat this week or inch up marginally because of inflows of additional funds from mature treasury bills.”We see rates remaining flat or at most inching up a little next week because of more funds coming to the system from treasury bill maturities, unless the CBN embarks on a mop up exercise,” another dealer said.

The CBN on Thursday sold N101.22bn ($642.26m) in treasury bills with maturity ranging from three months to six months, with yields down more than 100 basis points due to strong demand for the paper.

The bank sold N37.49bn of 91-day paper at a yield of 12 per cent, lower than the 13.64 per cent it offered at the previous auction. It sold N63.73bn in 182-day paper at 12.6 per cent, down from 13.80 per cent. Total subscriptions were at N220.88bn, while demand for the 182-day bond was the heaviest, at N143.48bn.

Meanwhile, yields on Nigeria’s five-year and seven-year bonds fell more than 300 basis points at an auction on Wednesday, as Nigerian bond market prepared for its inclusion in JP Morgan’s Government Bond Index for emerging markets from October.