By Babajide Komolafe
Interbank lending rates are expected to decline further this week in response to inflow of N405 billion inflow from maturing treasury bills.
Last week Tuesday, the Central Bank of Nigeria, CBN, deducted N650 billion from the account of some banks as Cash Reserve Ratio (CRR), levy for failure to meet the 65 per cent Loan to Deposit Ratio, LDR. This caused 900 basis points spike in interbank lending rates to 12.1 per cent average from 2.54 per cent average Friday the previous week.
The upward trend was however aborted on Friday by inflow of N900 billion from matured secondary market (Open Market Operations, OMO) treasury bills. Hence interbank lending rates dropped by 785 bpts to 4.25 per cent average at the close of business on Friday.
However, short interbank lending rates closed higher when compared to the closing level in the previous week.
Data from FMDQ showed that interest rate on Collateralised (Open Buy Back, OBB) lending rose by 179 bpts to 3.93 per cent on Friday last week from 2.14 per cent Friday the previous week. Similarly, the interest rate on Overnight lending rose by 164 bpts to 4.57 per cent from 2.93 per cent the previous week.
Investment analysts, however, opined that the decline in cost of funds on Friday will persist this week due to boost in liquidity expected from inflow of N405.9 billion comprising N74.84 billion from maturing Nigeria Treasury Bills (NTBs) and N331.05 billion from maturing OMO TBs.
According to analysts at Lagos based Cowry Assets Management Limited, “In the new week, CBN will auction T-bills worth N74.84 billion, viz: 91-day bills worth N10.00 billion, 182-day bills worth N20.00 billion and 364-day bills worth N44.84 billion. The maturing T-bills worth N74.84 billion, in addition to the maturing OMO bills worth N331.05 billion, we expect rates to decrease marginally amid boost in financial system liquidity.”