By Babajide Komolafe
Another bout of scarcity of funds is looming in the interbank money market following sharp decline in the volume of fund in the market.

naira sign

Last week, volume of funds fell by 55 per cent following outflows through foreign exchange purchases and withdrawal by the Nigeria National Petroleum Corporation (NNPC).

The corporation withdrew N69.1 last week while there was an outflow of  N44.424 billion through foreign exchange purchases. This prompted market liquidity to fall to N81.87 billion at the close of business on Friday, from N184.67 at the beginning of the week.

The sharp drop in volume of fund caused cost of funds to rise during the week. From  8.2 per cent the previous week, interest rate on Call lending rose to close at 9.4 per cent, while cost of Seven Days and 30 Days lending rose to 10.45 per cent and 11.79 per cent from 8.75 and 10.33 per cent respectively.

Meanwhile it was mixed fortunes for the naira last week as it depreciated by 10 kobo at the official market but appreciated by 10 kobo at the interbank market.

The depreciation of the naira at the official market was prompted by 14.6 per cent rise in demand, which was aggravated by 13.7 per cent drop in amount of foreign exchange sold by the Central Bank of Nigeria (CBN). Demand rose to $393.78 million from $343.1 the previous week, while amount sold dropped to $296.09 million, from $343.1 million. Consequently the official exchange rate rose to N148.6 per dollar from N148.5 per dollar the previous week.