Rates to ease on N73bn matured bills, payment to govt contractors

There are strong indications that interest rate should open this week around same level of 15 percent but could ease a little with the expectations of injection of about N73 billion in matured treasury bills and payment of debt to government contractors.

Nigeria’s interbank overnight lending rate rose sharply on Friday to an average of 15 percent from 5 percent penultimate week, after central bank debited commercial lenders for treasury bills purchases.

Traders said Nigeria sold a total of N190 billion ($670 million) in treasury bills on Friday with maturities ranging from three months to one year, with yields broadly flat.

Market liquidity had opened at N167.26 billion on Friday before last, but the money market went into repositioning 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 percent for overnight placement prior to the sale of treasury bills, but rose sharply to an average of 15 percent shortly after the result of the auction was announced,” one dealer said.

Nigeria’s financial market was closed for trading from Tuesday to Thursday for a public holiday, of which analysts estimate may have cost the country a whopping N138 billion.

Analysis show that there were scheduled treasury bills auction estimated at N94 billion, as well as N44 billion treasury bills maturity for the week, which the unusual straight three-day have put off.

The monetary policy measures were expected to put liquidity into the system in the week, with the auction component helping to taper its effect on money market rates.

The treasury bills auctions and maturities are usually executed between Tuesdays and Thursdays, save for seeming special interventions on Fridays.

Finance experts reason that in the event the monetary policy measures are implemented on Friday, the effect in the market rates would be minimal and driven by sentiments because the liquidity will not have trickled down to the market and volumes of interbank activities are usually moderate.

A national daily quoted a financial market operator as having said, “So, the week just ran like a closed economy. It is as if everyone was just sleeping and not waking up at all. That is exactly how gains and losses and value addition to the economy also remained standstill. Friday’s transactions are usually cautious one due to speculations over the week ahead. The auctions on Friday will not make much meaning.”