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Interbank lending rates to remain high as CBN auctions N136b T-Bills

By Chijioke Nelson   |   03 October 2016   |   4:18 am



Naira may touch N500/$ at parallel market this week
The rates at which banks lend to each other ended the week at double digits again last week, an indication of sustained liquidity tightening by the Central Bank of Nigeria (CBN).
The move, which is aimed at curbing speculations against the Naira at the foreign exchange market and inflation, heightened in the second quarter of 2016, making banks to borrow about N4 trillion from the apex bank’s Standing Lending Facility.
The Open Buy Back (OBB) and Overnight rates had closed last weekend at 14.3%, up 83 basis points (bps) compared with the previous week’s record and 15.2 per cent, down by eight bps, compared with the previous week’s level respectively.
The implications are that customers of banks will continue to borrow money at higher rates, while banks’ costs of meeting short term obligations on the other hand, will be rising and ultimately impact on their respective balance sheets.
This week, the situation has been projected to remain the same with the planned auction of N135.7 billion worth of Treasury Bills (T-Bills) on Wednesday, although there is going to be treasury maturity worth the same amount on the same day. But the liquidity of the maturing bills will surely not hit the system the same day.

Similarly, the parallel market exchange rate has been projected to reach a N500 per dollar mark this week, having touched a record low of N490 last week.
Analysts have said the Naira will remain under pressure at the parallel market, where foreign exchange activities are being dominated due to speculations, panic buying and the continuous exclusion of the 41 items from the official platform.
Consequently, the apex bank would be forced to continue its daily interventions at both segments of the interbank market- selling treasuries to moderate Naira availability for speculations and foreign exchange supply to help the local currency.
The Naira remained pressured last week as a result of illiquidity in virtually all segments of the foreign exchange market, pushing it to an all-time low of N490/$1 on Thursday and earlier trades on Friday, across Lagos State.
However, the exchange rate at the interbank has remained broadly stable as a result of frequent interventions by the apex bank, as Naira/Dollar spot rate opened the week at N308.50/$ on Monday, depreciated to N312.99/$ by midweek and appreciated to N305.31/$ after CBN’s intervention. On Friday, it closed lower at N311.62/$.
Meanwhile, the money market, starting off relatively liquid last week, with aggregate liquidity level at N113.2 billion, interbank rates- OBB and Overnight, eased 3.5 per cent points and 3.9 per cent points to close the first trading session of the week at 10 per cent and 11.3 per cent respectively.
However, despite the assessed system liquidity level in excess of N149 billion on Tuesday, OBB and Overnight rates rose 5.2 per cent points and 4.7 per cent points to close at 15.2 per cent and 16 per cent respectively, on the back of a N135.4 billion liquidity mop-up by the CBN.

They moderated by 0.5 per cent each, to settle at 14.7 per cent and 15.5 per cent by midweek, as well as 0.4 per cent and 0.3 per cent to close at 14.3 per cent and 15.3 per cent on Thursday respectively.

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  • real

    The central bank needs to stop the madness of chasing foreign investors with this constant treasury bill offer, and they need to stop fighting inflation with high interest rate. Nigeria inflation is not caused by excess liquidity in the system, it is cost by the depreciating naira and our massive importation demand. This is where the government needs to focus policies to reduce our demand for dollars.

  • Anuoluwapo Oladipo

    I’ve always said it. How on earth can there be two markets for FX?
    One sells at N305.25 to the dollar and the other sells at a whooping N490 to the dollar.
    Let me ask a simple question, if you were the one selling, which market will you sell to?
    The illegal one of N305.25 or the so called “legal” one of N490.
    CBN should scrap the illegal one of N305.25 and sell at N490 or allow naira to sell at it’s price to dollar.
    Also, there is the need to scrap all BDC, mop up all dormant dollar in domiciliary accounts and ensure Nigeria is self sufficient in things we can produce. That way we would have turned around SAP introduced and forced upon us and naira will find it’s value.
    Anything outside this is a loose loose situation.

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