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Interbank lending rates defy N413b securities auction, banks’ debit

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Parallel market rate falls to N450/$
Interbank lending rates were relatively stable through the weekend despite a combined auctions of government securities worth N413 billion, by the Central Bank of Nigeria (CBN) and Debt Management Office (DMO), as well as debit transactions against banks for foreign exchange intervention.

The development showed that credit in the financial system was also stable, as rates for mobilising quick cash by banks also influence their general outlook of lending to the real sector, as well as the retail segments.

CBN had raised about N253 billion in Treasury Bills, against planned N213 deals, made up of matured securities that were rolled over, while DMO overshot its target of N130 billion by additional N30 billion on the back of falling inflation.

According to Afrinvest Securities Limited, as banks got debited for the Special Wholesale Intervention Forward Sales of $150 million carried out on Monday, there was also another debit for successful bids at the DMO Bond auction.

This dragged liquidity down though the week till Friday, but could not significantly impact on interbank lending.

Specifically, the interbank instruments- Open Buy Back and Overnight trended lower instead, in all the trading days, except once, when it rose by 1,2 per cent and 1.1 per cent respectively.

Consequently, the week ended with OBB at 14.3 per cent and Overnight at 15 per cent, against 14.5 per cent and 15.3 per cent respectively, last week.

Analysts at Afrinvest said the prevailing rates may persist this week, although there is an expectation of a T-bills maturity of N135 billion, adding that impact on system liquidity may be tapered by a scheduled roll-over of the same amount.

Menawhile, as CBN sustained its foreign exchange intervention at the interbank market and Special Wholesale Intervention Forward Sales for maturing Letters of Credit (LCs), naira continues to gain strength at both ends.

Besides, the Deposit Money Banks have continued to sell Personal and Business Travel Allowances, tuition and medical fees, without challenges.

Consequently, exchange rate at the parallel market firmed up at the end of the week, from N460/$ at the beginning of the week to N455/$ mid-week and N450/$ on Friday.

However, the Naira marginally weakened against the Dollar at the interbank market during the week, as it exchanged from N306/$ on Monday to N306.75/$ on Thursday and N306.50/$ on Friday.



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