Rates to inch higher as T-bills maturity of N123.0bn exerts neutral impact

THERE are expectations that money market rates will inch higher from current levels due to continued liquidity mop up by the Central Bank of Nigeria (CBN). Dealers also expect that Treasury-Bills maturity of N123.0 billion expected to hit the system will have no impact on rates due to a rollover of the same net amount.

This week, “we expect the apex bank to continue mopping up liquidity through OMO auctions and thus expect money market rates to inch higher from current levels.  There is also a scheduled T-bills maturity of N123.0 billion expected to hit the system, but its impact on liquidity levels will be neutral due to a rollover of the same net amount,” one dealer said.

The CBN sold about N51 billion ($168 million) worth of treasury bills on Friday to mop up liquidity as the overnight lending rate traded flat around 10 per cent, traders said.

The bank sold N25 billion of 174-day open market operation bills at 18 per cent and N26 billion of the 364-day paper at 18.5 percent at an auction of Friday.

That brings the total of debt sales last week to N370.67 billion  as the Central Bank has been trying to remove cash from the banking system to contain annual inflation, which hit a more than 11-year high in September.

Dealers said liquidity got a lift by the central bank’s budget allocations for government agencies on Monday and the repayment of matured treasury bills due on Thursday, just as major players were willing to lend their cash at 10 per cent for overnight lending, unchanged to Thursday.

However, another dealers’ expectation differed a little, saying, “We expect the overnight rate to remain stable around the present level next week unless the central bank sustains its cash withdrawal exercise.