Interbank rates to moderate on improved financial system liquidity

EXPECTATIONS are high among dealers in financial instruments that the maturity of treasury bills worth N51.14 billion, via OMO on Thursday, June 08, 2017, will lead to improvement in financial system liquidity and resultant moderation in interbank rates.

Available data showed that the maturities will come through: 143-day bills worth N27.97 billion, 177-day bills worth N8.04 billion and 181-day bills worth N15.13 billion.

“Hence, we expect improvement in financial system liquidity and resultant moderation in interbank rates,” one dealer said.

The Central bank conducted a Primary Market Auction on Wednesday in which N26.1 billion, N11.0 billion and N80.0 billion of the 91-day, 182-day and 364-day instruments were offered at respective stop rates of 13.4 per cent, 17.1 per cent and 18.7 per cent.

Dealers said all instruments were oversubscribed; however the CBN allotted the exact amount that was offered at the auction.

Meanwhile, some stakeholders in the economy have raised concerns that the high returns on treasury bills and Federal Government bonds are having negative effects on productive activities in the country.

Mr Muda Yusuf, Director General, Lagos Chamber of Commerce and Industry, said this while assessing President Muhammadu Buhari’s two years administration at a Forum in Lagos.

The returns on treasury bills range from 15 per cent to 18 per cent depending on their tenor. Yusuf said the high returns were discouraging investors from putting their money in productive activities considering the risks and challenges of the business environment. The director general said that many investors preferred investing in treasury bills and bonds because they were not risky, tax free and with high returns.

According to him, commercial banks that are supposed to be lending to the manufacturers are also investing in treasury bills.