LAGOS: Nigerian interbank lending rates rose 1.25 percentage points on Friday to an average of 14.5 percent, compared with 13.25 percent last week as payment for foreign exchange and bonds purchases drained liquidity, traders said.
"The market opened with a very minimal cash balance on Friday, while the payment for foreign exchange and bonds further drained liquidity in the market pushing up cost of borrowing," one dealer said.
Nigeria sold 110 billion naira ($700 million) worth of bonds with maturities ranging from five years to 20 years at higher yields across, apart from a note maturing in 2015.
Traders said the market opened with a cash balance of about 72.7 billion naira, compared with 166 billion naira last week.
The secured Open Buy Back rose to 14.25 percent, compared with 13 percent, 2.25 percentage points above the central bank's benchmark rate of 12 percent.
Overnight placement climbed to 14.5 percent, from 13.25 percent, while call money rose to 14.75 against 13.25 percent last week.
"We expect a liquid market next week arising from the disbursal of portion of budget allocations to government agencies and rates are expected to drop to 10 percent level for overnight placement," another dealer said.
Dealers however said a possible change in the central bank's benchmark rate could alter the direction of interest rates in the market. The central bank will meet on Monday and Tuesday next week to set interest rates in Africa's second-biggest economy.
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