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WDAS, others rattle interbank with N165 withdrawal

By Babajide Komolafe

*Cost of funds rise to 12%

Scarcity of funds intensified in the interbank money market last week following outflow of N165 billion through  withdrawal by Nigeria National Petroleum Corporation (NNPC), Cash Reserve debit and funding of foreign exchange bids  at the Wholesale Dutch Auction System (WDAS).

Consequently cost of funds  rose further at the close of business on Friday. Interest rate on  Call lending closed  at 12 per cent, up from 11 per cent on Wednesday while collateralised lending or Open Buy Back (OBB) closed at 8.0  per cent, up from 7.8 per cent Vanguard investigation revealed that the increased intensity of the scarcity of funds  in the market last week is largely due to naira outflow for funding of foreign exchange transactions at WDAS. Last  week N131.6 billion left the market through foreign exchange, indicating more that 100 per cent when compared to the  outflow of N60.5 billion the previous week.

Similarly, N32.7 billion left the market last week due to withdrawal by NNPC from the major banks. Another 1.1  billion left the market due a Cash Reserve Requirement debit of N1.1 billion by the Central Bank of Nigeria.
The liquidity situation would have been more severe but for inflows of N107.4 billion through maturing treasury  bills and the Expanded Discount Window (EDW) of the CBN. From maturing treasury bills came N25.11 billion while  N81.96 billion came in from the EDW.

Vanguard had exclusively reported on Friday that, the increasing volume of foreign exchange sales at the Wholesale  Dutch Auction (WDAS) in recent times is impacting on market liquidity hence the upward movement of interest rate.  Vangaurd investigation revealed that total outflow per week through foreign exchange from the market rose to  steadily from N22.2 billion in the first week of August to N60.5 billion in the third week before dropping to N57  billion last week. Total outflow through foreign exchange in July was N172 billion. Last week, though demand for  foreign exchange fell by 18 per cent to $978.47 million from $1.195 billion, total amount sold more than doubled to  $875 95 million, from $382.89 million.  The rise in amount sold was due to 100 per cent increase in the amount of  foreign exchange offered by the apex bank from $400 million to $800 million, in a bid to assure that it is ready to  meet foreign exchange demand.


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