Interbank lending rises by 100% as CBN mops N392b

CBN headquarters building

Lending rates among banks rose by about 100 per cent at the weekend as the Central Bank of Nigeria (CBN) ended the week with a N392 billion auction in Treasury Bill.

The forms part of its effort to mop up excess liquidity from the system, as auctioned N30 billion in 181-day bill, but eventually sold N82.619 billion at a stop rate of 18%.

It also offered N60 billion in 342-day and sold N309.06 billion at a stop rate of 18.6% due to strong demand.Consequently, the quantity of money in circulation was heavily depleted, stoking a rise in the lending rates among banks, as Open Buy Back (OBB) and Overnight rates soared significantly upward by 550bps each to close at 10 per cent and 11.25 per cent from five per cent and 5.75 per cent respectively.

Sources said that some major fund placers were quoting about 20 per cent for overnight placement, but most borrowers were not willing to take at that rate, until it ended at the prevailing rates.

Markets had opened on Thursday with a surplus liquidity of about N467 billion due to an injection of matured Treasury bills until the central bank later debited banks for the purchases of N302.4 billion in primary market Treasury bills.

According to SCM Capital, “activity in the Treasury bill space responded to the OMO auction offered by the CBN today.  The market earlier commenced on a bearish note with sell-offs noticed majorly on the maturity offered at the auction (August 3, 2017) which moved up 30-40bps from 17.40% to 17.80%.

“Demand however filtered on the short dated papers which eventually closed by 20-30bps lower than their previous levels.

“The bond market witnessed a steepened yield curve despite few transactions. There were reports that most traders were cautiously trading on the 10-year and 20-year paper with the primary auction in view.”

Meanwhile, at the inter-bank, the Naira exchange rate closed flat at N305.25/$, as CBN maintained its daily intervention of $1.5 million, while the parallel market also closed at N498/$.

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