BUSINESS
Interbank lending rate eases by 10% in one week
The largest economy in Africa’s interbank lending rate eased by a total 10 per cent at the end of money market closure on Friday, falling sharply to five per cent from 15 per cent recorded the previous week.
Money market traders, however, anticipate high cost of borrowing among Deposit Money Banks (DMBs) operating in the country this week as the Central Bank of Nigeria (CBN) sells more treasury bills to mop-up excess liquidity and intervene in the foreign exchange market.
Consequently, the latest interbank lending rate has been linked to the distribution of budget allocations to government agencies within the week.
A day before the closure, the overnight placement had closed around 11.6 per cent at the interbank, with a total of N652.2 billion ($2.14 billion) in budget allocations to the three tiers of government: Federal, States and local, during the week while a portion of states and local government money hit the banking system on Friday.
It is a well known fact that Nigeria’s government distributes revenue from its crude oil exports among its three tiers of government.
Traders, however, noted that the apex lender sold N72.4 billion worth in open market operations (OMO) Treasury Bill (TB) with tenor range of 188 and 314-day in a bid to reduce the impact of the budget disbursal on the money market.
Traders said cost of borrowing among commercial lenders is expected to rise next week as the central bank sells more treasury bills to mop-up excess liquidity and intervene in the foreign exchange market.
In the meantime, transaction turnover in the Nigeria’s fixed income and currency markets have increased by a total sum of N3.13 trillion in June while compared to the value recorded in May, latest FMDQ OTC monthly report has revealed.
Both markets in the month under review, recorded a new figure of N12.62 trillion, representing 34.56 per cent in June, year-on –year (y-o-y).
The report specifically indicates that the treasury bills (T-bills) segment of the fixed income market continued its dominance the market in the month of June 2017 accounting for 43.22 percent, against 40.73 per cent recorded in May while FGN2 bonds recorded 6.22 percent compare to 5.23 per cent in May of total turnover in June.
Turnover in the fixed income market generally, in the month under review, settled at N6.24 trillion, representing a 43.03 percent (N1.87trn) month-on-month increase. Transactions in the T-bills market accounted for 87.41% of the Fixed Income market, from 88.67 percent the previous month.
Outstanding T-bills at the end of the month stood at N8.51 trillion, a decrease of 3.98 percent month-on-month (N8.87trn in May), whilst FGN bonds’ outstanding value increased by 1.44 percent (N0.09trn) month-on-month to close at N7.03 trillion in the period under review.
The trading intensity in the fixed income market for the month under review settled at 0.62 and 0.11 for T-bills and FGN bonds respectively, from 0.43 and 0.07 recorded for the previous month. Maturities up to one month became the most actively traded, accounting for the turnover of N1.65 trillion in June.
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