By Babajide Komolafe
The scarcity of funds in the interbank market intensified last week following further outflow of N206 billion from the market. The foreign exchange rate however was relatively stable during the week, with the naira suffering marginal depreciation.

INTEREST RATE

Cost of funds rose in the interbank market as scarcity of funds intensified in response to outflow of N206 billion during the week. Data from the Financial Market Dealers Association of Nigeria (FMDA) show that interest rate for Call lending rose to 10 per cent from 7.9 per cent the previous week. 7-Days lending and 30-Days lending similarly rose to 10.6 and 11.9 per cent from 8.9 and 11.1 per cent respectively.

Vanguard investigation reveals that the market experienced outflow of N133.38 billion through withdrawal by Nigeria National Petroleum Corporation (NNPC), N60.75 billion through foreign exchange purchases and N12 billion through treasury bills purchases. On the other hand, the N30.9 billion came in through public sector overheard cost funds. As a result market liquidity closed at N14.8 billion from N94.15 billion the previous week.

Market operators expect the scarcity of funds to further intensify this week with cost of funds rising further as there is little or no prospect of significant inflow of funds while more outflow is expected.

EXCHANGE RATE

The naira depreciated marginally in the official market last week, losing nine kobo to the dollar due to 18 per cent rise in foreign exchange demand.

The official exchange rate rose to N150.4 from N150.3 the previous week. Results of the Wholesale Dutch Auction System (WDAS)  sessions conducted by the Central Bank of Nigeria (CBN) show that total demand rose to $452.28 million from $380.71 million the previous week, while the amount sold by the  apex bank rose slightly by 6.9 per cent to $400 million from $374 million.

In the first session held on Monday, demand rose by 82 per cent to $225.8 million from $124.04 million, while the official exchange rate rose marginally by three kobo to N150.34. In the second session on Wednesday, demand was relatively stable at $226.48 million while the exchange rate rose by five kobo to N150.4 per dollar.

The interbank exchange market opened the week with 22.75 kobo depreciation of the naira, with the interbank rate rising to N152.7275 from N152.5 the previous week. The interbank rate however fell consistently from N152.665 on Tuesday to  N152.2825 on Thursday, indicating 54.5 kobo appreciation.

This trend was however reversed on Friday, as the interbank rate rose by 22.5 kobo to N152.505. Cumulatively, the naira lost 0.5 kobo at the interbank for the week.