Nigerian interbank rates ease on budgetary inflows

Nigeria's interbank lending rates closed at an average of 13.50 percent this week, easing from 15.50 percent last week, following the release of some of December's budgetary allocation to government agencies, traders said on Friday.

The borrowing rate opened the week at 12.25 percent on large budgetary inflows, but rose back up to Friday's close after the central bank mopped up liquidity by selling treasury bills.

"A portion of December budget allocations to state and local governments finally hit the system on Monday, helping to boost liquidity level and this reflected in the cost of borrowing at the interbank," one dealer said.

December budgetary allocation were delayed for over two weeks, causing a liquidity squeeze in the system, pushing up cost of borrowing in the interbank market last week.

Africa's top crude-oil exporter shares proceeds from oil sales from a centrally held account every month to its three tiers of government - federal, states and local - providing liquidity to the banking system and impacting on lending rates.

The secured Open Buy Back (OBB) eased to 14.0 percent from 15.0 percent last week, 200 basis points above the central bank's 12.0 percent benchmark rate, and 4.0 percentage points above the Standing Deposit Facility (SDF) rate.

Overnight placement dropped to 13.50 percent from 15.50 percent, while call money traded at 14.0 percent against 16.0 percent last week.

Market opened on Friday with a cash balance of 225 billion naira ($1.40 billion) compared with about one billion naira cash balance a week ago.

"The market is expected to tighten up next week, while lending rates should climb higher because of the aggressive liquidity mop-up exercise by the central bank and regular funding for foreign exchange and treasury bills purchases," another dealer said.

Also, Nigeria plans to auction treasury bills worth 149.27 billion naira at its regular debt auction next week, further exerting pressure on liquidity.