Leadership (Abuja)
Amaka Ifeakandu
8 November 2009
Lagos — The nation's interbank lending rates climbed to 5.83 per cent on the average last week, from 4.25 per cent traded the previous week. However, the rise was dampened after the central bank lowered its deposit rate to boost liquidity, traders said. The MPC on Tuesday left its benchmark interest rate (MPR) at 6.0 per cent, but widened its corridor for lending and deposit rates to 200 basis points above MPR for lending and 400 basis points below for borrowing, in a bid to stimulate lending.
The corridor was previously set at two percentage points either side of MPR. Similarly, the secured Open Buy Back increased to 5.0 per cent last week against 4.0 per cent recorded in the preceding week,while overnight rose to 6.0 per cent from 4.25 per cent. Call money also closed at 6.5 per cent against 4.5 per cent traded last two weeks. LEADERSHIP gathered that the CBN's measure aims to end banks' preference for placing surplus funds at its overnight window, while refusing to lend to the real economy, by encouraging them to go out and find better rates of return in the interbank market.
Dealers said that ordinarily, interbank rates would have gone up higher this week as a result of some major outflows from the system, but for the apex bank's measure, it grew slightly. They said that about N86 billion ($575 million), part of an agricultural development fund initially disbursed to some banks in April, was recalled by the Central Bank, while funding for forex purchases drained some liquidity in the system. Another dealer said that about N55 billion in matured treasury bills was repaid, helping to maintain a positive liquidity balance of over N100 billion last week. They predicted that there is tendency that the rates will go up this week, but not beyond 10 per cent on the average, as there will be auction for about N75 billion of treasury bills and funding for foreign exchange purchases.
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