Nigerian interbank rates rise on Treasury bills sales


Nigeria interbank lending rates rose 3.25 percentage points week-on-week on Friday to 9.25 points on average, driven by large treasury bills sold at both primary and secondary market by the central bank, which soaked up liquidity from the system.

The central bank sold about 250 billion naira ($1.26 billion) in the open market operations bills and 150.6 billion naira worth at an auction on Wednesday.

“The market has been very liquid from the spillover from budget allocations and large matured bonds two weeks ago, but the outflows to fresh treasury bills sales drained some liquidity and caused rates to rise on Friday,” one dealer said.

Nigerian interbank lending rates dropped below 10 percent three weeks ago, their lowest this year, because of a liquidity boost from a large cash injection into the banking system from retired bonds, treasury bills and budget allocations to government agencies.

Banks had a balance at the central bank of 494 billion naira on Friday compared with over 840 billion naira on Monday, traders said.

The secured Open Buy Back rose to 9 percent from 6 percent, 4 percentage points below the central bank’s 13 percent benchmark rate.

Overnight placement rose to 9.5 percent against 6 percent last week.

“We expect little change in lending rates next week, unless central bank embark on aggressive mopping up of liquidity” to reduce excess cash in the system, another dealer said.

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