Babajide Komolafe
The amount of funds in the interbank money market fell to a deficit position of N47 billion causing interbank interest rates to rise to highest level for the year.

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Meanwhile, foreign exchange demand at the Wholesale Dutch Auction System (WDAS) rose sharply by 40 per cent due to the sallah holiday.

From surplus position of N81.87 billion, the amount of funds in the market fell to a deficit of N47.72 billion at the close of business on Friday and till Monday. Indicating  banks relied  on the Standing Lending Facility of the Central Bank of Nigeria (CBN) to fund some of their operations last week.

The precarious liquidity position of the market  cause cost of funds to rise sharply. Interest rate on Call lending rose to 12.04 from 9.6 per cent the previous week, while interest rate Seven Days  lending  rose to 12.6   from 10.9 per cent .

The scarcity of funds was prompted by outflows through funding for foreign exchange and treasury bills purchases. The market experienced outflow of N171.5 billion through treasury bill funding while N44.3 billion left the market for foreign exchange funding.

Market operators said that the scarcity of funds might persist this week despite expected inflows from statutory allocation to the three tiers of government. “We expect market behavior in the coming week to be mixed week due to the expectation of FAAC (Federation Accounts Allocation Committee) Funds’’, said Financial Market Dealers Association in its week market report.

Meanwhile, foreign exchange demand  the Wholesale Dutch Auction System (WDAS) conducted on Monday  rose sharply by 40 per cent due to the sallah holiday which implies there would be no auction on Wednesday. From $173.4 million demand at the auction last Wednesday, demand rose to $288.8 million on Monday. The Central Bank of Nigeria (CBN) however sold only $250 million.

The unsatisfied demand of $38.8 million caused the naira to depreciate by 11 kobo as the official rate rose further to N148.81 kobo from N148.7 per dollar. The naira also depreciated by 17.5 kobo at the interbank foreign exchange rate as the interbank rate rose to N150.82 from N150.795 per dollar.