Interbank rates fall amid N519b NDIC premium, CRR debits, forex provisions

Exchange rate stable at official, parallel markets

For the second week in a row, the interbank lending rates failed to rise even as the liquidity level in the financial system was depleted significantly towards the end of the week’s activities, from about N518.8 billion to N405 billion.

The cash withdrawals effected through premium payments to the Nigerian Deposit Insurance Corporation (NDIC); Cash Reserve Requirements (CRR) debits and foreign exchange auction provisions by bank left the Open Buy-Back and Overnight rates lower than previous week at 3.1 per cent and 3.6 per cent respectively.

A trader said that the level of liquidity now is sufficient to support transactions at the money market, leading to moderation of borrowing costs among banks, defying rate influencing factors.

Already, there are projections that the mood in the market will subsist this week, as treasury bills worth N91 billion will be due for redemption, while unfulfilled cash deposits made for forex auction by banks will return to the system.

The OBB and Overnight rates had opened last week at 3.8 per cent and 4.3 per cent due to robust system liquidity and later rose by 2.5 per cent and 2.3 per cent to settle at 6.3 per cent and 6.6 per cent respectively as the CBN mopped up about N40.3 billion from the system.

The rates however moderated to 3.8 per cent and 4.4 per cent in the middle of the week as inflows from unfulfilled foreign exchange provisioning refunds by CBN to banks for the previous week hit the system.

Consequently, market liquidity stood at N923.8 mid-week, but reduced to about N405 billion as market opened on Thursday and subsequently, closed the week down at 0.7 per cent week-on-week respectively.

Meanwhile the foreign exchange market continues to remain relatively stable week-on-week, although the spread between the official/interbank and the BDC/parallel market rates remains staggering.

While the Naira/Dollar exchange rate at the CBN and interbank remained at N197/$ and N199.50/$, at the BDC segment, it traded at N320/$ on all trading days of the week, with the parallel market rate pegged at N322/$ on all trading days, except Tuesday when it declined marginally to N323/$.

Relatedly, the treasury bills market was broadly bullish last week as average rate declined on most trading days.

Specifically, average bill eased 0.6 per cent from the previous trading session to close at eight per cent at the beginning of the week, declined further by 0.1 per cent to 7.9 per cent on Tuesday, as activities on short termed instruments increased.

In the middle of the week, CBN auctioned treasury bill worth N218.9 billion, allotting N19 billion for 91-day; N33.5 billion, 182-day; and N166.4 billion for 364-day, at stop rates of 6.1 per cent, 8.7 per cent and 9.5 per cent respectively.

With interests focused majorly in the 364-day bills, it was oversubscribed by about 175.4 per cent, compared with the 91-day bill that was undersubscribed by 54.5 per cent.