Lending rates to remain high on N400bn mop up

Following huge sells of Treasury bills on Friday by the Central Bank of Nigeria (CBN), lifting the interbank lending rate up to 12 per cent, traders said there is high expectation that money market rates will remain high this week.

According to dealers, the central bank sold about N400 billion ($1.27 billion) comprising N82 billion in 181-day Treasury bills at 18 per cent and N309 billion at 18.6 per cent, mopping up liquidity from the money market and pushing up the cost of borrowing among commercial lenders.

“This  week, we  anticipate  increase  in  interbank  lending  rates  in  the  absence  of  major financial  system  inflows.

“We have some major placers quoting about 20 per cent for overnight placement, but most takers are not willing to borrow at that rate,” one dealer said, adding that the rate eventually settled between 10 per cent and 12 per cent in the afternoon.

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 302.4 billion in primary market Treasury bills.

Traders said the central bank on Friday further moved to reduce liquidity with the sale of open market operations bills, which fetched returns above the inflation rate.

Nigeria raised N302.4 billion at Wednesday’s Treasury bills auction, more than the N242 billion planned due to strong demand for the one-year debt, while payment for the purchased was debited from commercial lenders’ accounts on Friday.