Interbank lending rates eased sharply last week to an average of 11.83 per cent, from 14.50 per cent after market liquidity was buoyed by the disbursement of a portion of the March budgetary allocation to government agencies.
About N300.86 billion ($1.91 billion) in the March budgetary allocation to the three tiers of government - federal, state and local - hit the system on Thursday, boosting liquidity in the system and sinking the cost of funds among banks.
The nation distributes revenue from oil exports from centrally held accounts to its tiers of government each month, providing the banking sector liquidity for their operations.
Dealers said market opened with a cash balance of about N331.81 billion on Friday, compared with a N2.89 billion negative balance the previous week.
“The posting of budgetary allocations on Thursday helped ease cost of funds among banks,” one dealer said.
Dealers said they see the cost of borrowing among banks inching up gradually this week as a result of an aggressive mopping up exercise by the central bank, through the conduct of open market operations.
“Rates could trend up to around 14 per cent on average for the overnight this week if the central bank continues its aggressive fund mopping-up exercise,” another dealer said.
The secured Open Buy Back (OBB) dropped to 11.50 per cent from 14 per cent last week, on the impact of the liquidity surge. OBB was 50 basis points below the central bank’s 12 per cent benchmark rate, and 1.50 percentage points above the Standing Deposit Facility (SDF) rate.
Overnight placement and call money fell to 12 per cent each, compared with 14.50 per cent and 15 per cent, respectively last week.