Interbank lending rates fell to 9 percent on average on Friday compared with 25 percent last week in anticipation of monthly budgetary allocations to government agencies.
Nigeria distributes revenue from oil exports among its three tiers of government – federal, states and local government – every month. Dealers said February allocations would filter through the banking system by close of business on Friday.
“Lending rates dropped because of the expected cash flows from budget and payment of interest on bonds to some investors,” one dealer said.
Cost of borrowing among banks had shot up to 25 percent last week partly because of debiting of banks’ accounts for premium payment to the Nigerian Deposit Insurance Corporation (NDIC).
“Although, NNPC (state-owned energy firm) recalled about 100 billion naira ($503 million) from lenders to its account with the central bank this week, payment of interest on bonds countered the impact on system liquidity,” another dealer said.
The secured Open Buy Back (OBB) fell to 9 percent from 25 percent last week. The secured fund was 4 percentage points below the 13 percent central bank’s benchmark interest rate.
Overnight placement also fell to 9 percent against 25 percent last week. Lending rates among banks are expected to stay steady next week because of the anticipated increase in liquidity from the disbursal of monthly budget allocations.