INTER-BANK RATES STAY LOW ON EXCESS CASH

Inter-bank lending rates were stable at record lows this week after additional funds from the country's windfall oil savings were disbursed to government agencies.

The secured Open Buy Back was flat at 1.10 per cent, 10 basis points above the Central Bank of Nigeria's Standing Deposit Facility rate, but well below the bank's six per cent benchmark interest rate.

Overnight placement and call money were also stable at 1.20 per cent and 1.25 per cent, respectively. About N79bn, part of the planned $1bn disbursal from the windfall oil savings, finally hit the system on Tuesday. This further swelled liquidity with few alternative investment outlets, traders said.

'The market has over N600bn deposit balance with the central bank as at Thursday, while the idle portion was about N158bn,' one dealer said.

Traders said despite the sale of $307.77m at the CBN's bi-weekly forex auction and N40bn in 91-day and 182-day treasury bills, there was still enough liquidity to meet all obligations.

'Not much is happening in the market as most banks merely place their idle cash with the central bank, given the fact that there is no other alternative source of investment,' another dealer said.

Nigerian banks depend largely on the cyclical release of funds from the central account to the three tiers of government-federal, state and local-for their operations.

But a credit freeze has forced many of the banks to deposit their surplus cash with the central bank despite the cut in the SDF by 100 basis points to one per cent last month.

Traders said the rates would stay relatively stable as the market was expected to remain liquid in the short-term.

Meanwhile, the naira remained flat at N150.10 against the US dollar on the inter-bank market on Thursday due to weak demand versus high liquidity ahead of the Easter holiday, traders said.

The Nigerian National Petroleum Corporation sold $150m to some banks on Wednesday, but those that bought were not selling, preferring to wait until after the holiday on Friday and Monday when the market would be closed.