By Babajide Komolafe

Cost of funds in the interbank money market closed higher last week as scarcity of funds intensified in the market. The naira however recorded mixed fortunes as foreign exchange demand rose by 54 per cent.

INTEREST RATE: Despite N200 billion power and aviation sector intervention fund from the Bank of Industry BOI, cost of funds rose by 80 basis points on the average. Compared to the closing level of the previous week, interest rate on Call lending rose by 154 basis points to 9.58 per cent, 7-Days rose by 137 basis points to 10.29 per cent while 30-Days lending rose by 58 basis points to 11.29 per cent.

But for the inflow from BOI, cost of funds would have risen higher. The money which was released Wednesday halted the upward trend of interest rate on Monday and Tuesday, causing rates to drop sharply on Wednesday. For example, Interest rate on Call lending fell to 5.0 per cent from 8.3 on Tuesday, while cost of 7-Days and 30-Days lending dropped to 6.67 and 9.37 per cent from 9.0 and 10.29 per cent. But the inflow was not strong enough to sustain fall in rates hence rates picked up again on Thursday and Friday.

FOREIGN EXCHANGE: The naira recorded mixed fortunes last week, appreciating by five kobo at the official segment while depreciating by 22 kobo at the interbank segment, even as foreign exchange demand rose by 54 per cent at the official segment.

From $452.28 million last week, demand for foreign exchange rose to $697.29 million at the two auctions conducted by the Central Bank of Nigeria (CBN). The amount sold stood at $617.79 million, indicating 54.5 per cent increase when compared with the $400 million sold the previous week.

In spite of the increased demand the naira however appreciated in the official market

The official exchange rate had rose by 11 kobo on Monday before falling by 16 kobo to N150.45 per dollar on Wednesday. When compared to the N150.5 closing rate of last week, the naira appreciated by five kobo.

The interbank exchange rate followed a similar pattern first rising by 124.74 kobo to N153.7475 per dollar only to fall by 107.25 kobo to N152.675 per dollar on Wednesday.

But on Thursday the rate rose again by 117 kobo to N153.85 per dollar, and on Friday, it fell by 49 kobo and closed at N153.355 per dollar.