The Nigerian Interbank Offered Rates (NIBOR) increased significantly to an average of 18.5 per cent on Friday, as against the 10.24 per cent it closed the preceding Friday, due to a decline in the level of liquidity in the system.
According to dealers, the interbank market, which is a market for short-term borrowing among commercial banks recorded withdrawals than injection last week.
The Central Bank of Nigeria (CBN) sold treasury bills worth N100 billion via Open Market Operations (OMO). A breakdown of the fixed income instrument sold showed that it comprised of 147-day bills worth N50 billion; 121-day bills worth N20 billion; and 122-day bills worth N30 billion. The monetary policy measure was basically to reduce the volume of money in circulation.
In addition, there were also withdrawals for purchase of forex put at about N124.23 billion as well as federal government bonds worth N90 billion that was sold last week.
Therefore, the outflows exceeded the inflows of N166.48 billion in matured treasury bills. The inflow from matured treasury bills comprised of 101-day bills worth N26.05 billion; 142-day bills worth N97.05 billion; and 147-day bills worth N43.38 billion.
Consequently, data from the FMDQ OTC showed that the NIBOR for all tenors increased.
For instance, while the Call tenor jumped to 17.75 per cent on Friday, from 11 per cent the preceding Friday, the 7-day tenor climbed to 17.92 per cent, from 11.25 per cent the preceding Friday.
In the same vein, just as the 30-day tenor closed higher on Friday at 18.29 per cent, from 11.54 per cent, the 60-day tenor also increased to 18.54 per cent, from 11.79 per cent.
In the same vein, the 90-day, 180-day and 365-day tenors all closed higher at 18.79 per cent, 19.04 per cent and 19.29 per cent respectively.
“This week, we anticipate moderation in interbank rates following Federation Accounts Allocation Committee (FAAC) disbursements worth N641.29 billion; maturing bonds worth N65 billion and maturing treasury bills worth N257.11 billion (viz: 91-day bills worth N50.28 billion; 141-day bills worth N42.93 billion; 150-day bills worth N66.91 billion; 182-day bills worth N33.27 billion; and 364-day bills worth N63.73 billion),” analysts at Cowry Asset Management Limited stated in a report at the weekend.
The firm also anticipated that that greater priority for exchange rate stability which would likely necessitate maintenance or an upward review of the Cash Reserve Requirement (CRR) of banks would be the focus of the Monetary Policy Committee (MPC) which meets next week (March 24th and 25th).
“Howbeit, the Monetary Policy Rate may be unchanged at 12 per cent given consideration for already high cost of funds to the real sector,” the firm added.