By Babajide Komolafe
Government securities benefitted from surplus funds in the banks vaults, recording N539.86 billion patronage last week, reflecting excess liquidity in the interbank money market.
This translated to 180 per cent oversubscription to the N300 billion worth of government securities or borrowing instruments (treasury bills) offered by the Central Bank of Nigeria (CBN).
The apex bank offered five variant of secondary market bills with tenors ranging from 36 days to 265 days. It offered N100 billion worth of 36 days bills, N50 billion worth of 119 days bills, N50 billion worth of 168 days bills, N50 billion worth of 167 days bills and N50 billions of 265 days bills.
Total public subscription was N237 billion for the 36 days bills, N114.82 billion for the 119 days bills, N58.22 billion for the 168 days bills, N76 billion for the 167 days bills and N53.55 billion for the 265 days bills.
The oversubscription was occasioned by surplus funds or excess liquidity in the interbank money market, where banks lend and borrow money from one another.
The market had closed 2011 with a surplus fund of N234 billion following inflow from money shared by the three tiers of government and excess revenue for sale of crude oil (excess crude account). But during the week, the market experienced additional inflow of funds courtesy of N70 billion paid to federal government parastatals and N35 billion cash call funds. Consequently, despite outflow of N47.48 billion to fund purchase of foreign exchange, the market closed with surplus funds of N290 billion.
Reflecting the level of liquidity in the market, cost of funds dropped significantly during the week. On the average interest rate on the short tenured funds fell by 45 basis points. Data from the Financial Market Dealers Association (FMDA) show that Interest rate on Call lending fell to 13.42 from 14.08, interest rate on 7-Days lending fell to 14.04 from 14.62 while interest rate on 30-Days fell to 15.13 from 15.25 per cent.
Analysts at the Kakawa Discount House predicted that the interbank market would remain liquid this week, indicating that cost of funds would remain relatively stable.
Meanwhile, the naira lost 205 kobo to the dollar at the interbank foreign exchange market last week. From N160.1 per dollar the previous week, the interbank exchange rate rose to N162.15 per dollar on Friday, translating to 205 kobo depreciation. The depreciation was triggered by speculative demand occasioned by the industrial action and mass protest declared by the labour for today, over the removal of fuel subsidy.
At the official foreign exchange market, the CBN sold $300 million while the official exchange rate rose slightly to N156.71 from N156.70 per dollar, translating to 10 kobo depreciation for the naira.