Nigeria Content Online

Nigerian interbank lending rates
eased to 1.16 percent on average this week from 7.33 percent last week after
about 390 billion naira in monthly budgetary allocations to states and local
governments was injected into the system, traders said on Friday.

The secured Open Buy Back (OBB)
eased to 1.05 percent from 6.5 percent, after initially dropping to 1.10
percent on Wednesday when part of the funds hit the system.

Overnight placement fell to 1.20
percent from 7.50 percent, while call slipped to 1.25 percent from 8.0 percent.

The finance ministry announced
the disbursal of 750 billion naira from the federation account to the three
tiers of government — federal, state and local — on Monday, but part of the
funds meant for states and local governments came into the system between
Wednesday and Thursday, helping to ease the tight liquidity in the market.

“The system closed with a
surplus balance of about 310 billion naira, this is more than sufficient to
keep the system liquid for the coming week,” one dealer said.

Banks in sub-Saharan Africa’s
second biggest economy depend largely on monthly cash inflows from budgetary
disbursals to its agencies to fund their operations.

Africa’s biggest energy producer
shares oil revenues between federal, state and local governments each month in
order to pay salaries, fund development projects and keep government running,
providing the bulk of liquidity in the economy.

The federal government’s portion
of the funds is kept with the central bank, while that of the other two tiers
goes in the accounts with retail banks.

Dealers said the cost of
borrowing among banks could remain stable next week despite plans by the
central bank to sell treasury bills at the secondary market in a bid to reduce
the impact of excess liquidity on the economy.