NIGERIAN interbank rates rose to 2.16 percent on average last week from a record low of 1.28 per cent the previous week after Nigeria National Petroleum Corporation (NNPC) withdrew N90 billion from the system.
The firm sells foreign exchange to banks each month and deposits the proceeds with the Central Bank of Nigeria (CBN) to meet official money supply controls, thus draining liquidity.
The drop is contrary to market expectations that rates will nose-dive further last week following the slashing of the standing facility deposit rate from two to one percent by the CBN.
The cutting of the standing facility deposit rate to one percent was to discourage banks that were already having about N600 billion from keeping money with it in a bid to boost lending.
However, investigations revealed that the banks did not respond to the CBN move to lent to the economy, but still prefer to leave their funds with the apex bank.
The Open Buy Back (OBB) climbed to 1.75 percent from 1.10 percent, but still below the CBN’s benchmark rate of 6.0 percent.
Overnight rose to 2.25 percent from 1.25 percent, while call money closed at 2.50 percent against 1.50 percent, dealers said.
Interest rates in Africa’s top energy producer plunged to a multi-year low of 1.28 percent after the apex bank cut its Standing Deposit Facility (SDF) rate by 100 basis points to 1.0 percent the previous week.
Dealers said the expected debiting of banks’ accounts this week for premium payment to the Nigerian Deposit Insurance Corporation (NDIC) also forced the rates to climb slightly.
The market closed with a surplus of about 335 billion naira, down from 574 billion naira excess last week, reflecting the NNPC withdrawal and outflow in payment for foreign exchange purchases in last week.
”The system remained liquid, but the rates went up due to sentiments and fear that the planned debiting for NDIC premium and bonds auction next week could further reduce liquidity in the system,” one dealer said.
Nigeria plans to raise 60 billion naira from 3-year, 10-year and 20-year bonds auction on last week Wednesday.
The rates could ease this week if expected fresh inflows in monthly budgetary allocations to government agencies come in.