Scarcity of funds intensified in the interbank money market last week as the market experienced outflow of about N200 billion which countered the effect of the N285 billion inflows from statutory allocations.

Meanwhile, the naira fell by 100 kobo against the dollar at the interbank market due to demand pressure for unfunded letters of credit (L.Cs)

Market analyst at the Financial Market Dealers Association predicted that the scarcity would further intensify this week as the market is expected to experience significant outflow this week while there is little or no prospect of inflow.

Investigations revealed that cost of funds fell marginally due to the inflow from statutory allocation approved by the Federation Accounts Allocation Committee last week.  Though the committee approved N414 billion, the market received N285 billion.

As a result, cost of funds which had been stable from Monday to Thursday, fell marginally on Friday. Interest rate on Call money fell to 8.04 from 10 per cent the previous week, while  7-Days money and 30-Days money fell to 8.92 and 10.7 per cent from 10.5 and 11.87 per cent.

The decline in cost of funds would have been significant but for outflow of about N200 billion from the interbank market.

During the week, the Central Bank of Nigeria (CBN) debited banks for Cash Reserve Ratio (CRR), and this resulted to outflow of N100 billion. It would be recalled that CRR was recently reviewed upwards to two per cent from one per cent effective March 1st.

The market also experienced outflow through the bond market (N65.5 billion) and foreign exchange funding (N50 billion).

Meanwhile, the nation’s currency – naira, depreciated further in the foreign exchange market last week. At the interbank segment, it depreciated by 100 kobo while it lost 10 kobo at the official segment.

Result of the bi-weekly official foreign exchange auction showed that the official exchange rate rose to N150.47 per dollar during the first auction on Monday, indicating 17 kobo depreciation when compared with the closing rate of N150.4 the previous week. It however fell to close the week at N150.50 on Wednesday.

The depreciation of the naira was fuelled by 23 per cent rise in foreign exchange demand. Demand rose to $433 million from $349.8 million the previous week. Amount sold also rose by almost the same margin to $403 million from $324 million.

Reflecting the impact of the increased demand on the interbank segment, interbank exchange rate rose persistently during the week closing at N153.570 per dollar as against the closing rate of N152.505 per dollar the previous week.