Interbank rate rises on cash shortage
The interbank overnight lending rate rose sharply Friday, to an average of 15 per cent from five per cent a week ago, after the Central Bank of Nigeria (CBN) debited commercial lenders for treasury bills purchases.
A total of N190bn (about $670m) in treasury bills was raised at the stock exchange floor with maturities ranging from three months to one year, with yields broadly flat.
The CBN sold N28bn of the 3-month treasury bills at 9.98 per cent, compared with 9.99 per cent at the June 22 auction and N42bn worth of the 6-month bill at 12.24 per cent against 12.30 per cent previously.
The bank sold N120bn worth of the one-year paper at 14.99 per cent, the same rate as at the last auction.
The Reuters report said that the treasury bills were issued as part of measures to finance the government budget deficit and help manage liquidity in the banking system.
Market liquidity had opened at 167.26bn naira, Friday, but the money market went into repo after the central bank sold treasury bills which significantly reduced level of cash in the banking system, pushing up cost of borrowing among banks.
“The market was trading around 10 per cent for overnight placement prior to the sale of treasury bills, but rose sharply to an average of 15 per cent shortly after the result of the auction was announced,” one dealer said.
The financial market was closed for trading from Tuesday to Thursday for a public holiday (Reuters).