Interbank rates rise on cash reserves: Nigeria

LAGOS: Nigerian interbank rates climbed to an average of 12.50 percent this week from 10.58 percent last week after a new rise in lenders' cash reserve requirement came into effect, traders said on Friday.

The secured Open Buy Back (OBB) closed flat at 10 percent, 200 basis points above the benchmark rate and 4.0 percentage points over the Standing Deposit Facility (SDF) rate.

Overnight placement rose to 13.50 percent from 10.75 percent, while call money climbed to 14 percent from 11 percent.

The central bank announced in May an increase in banks' cash reserve requirement (CRR) to 4.0 from 2.0 percent, citing a need to rein in inflation and control surging liquidity in the system. The hike came into effect on June 8.

"Most banks made provisions for CRR this week, while cash withdrawal by the NNPC also impacted on liquidity in the system and caused rates to rise across board," one dealer said.

The state-run Nigerian National Petroleum Corp (NNPC) sold about $400 million to selected banks last week and recalled part of the proceeds to its central bank account as part of its obligations to fund the federation account.

The market opened with a balance of 48 billion naira ($309.4 million), far less than the 149.19 billion naira in lenders' central bank accounts last week, traders said.

"The cost of borrowing will rise initially next week but could fall towards the end of the week in anticipation of the release of May budgetary allocations to government agencies," another dealer said.

The indicative rates for the Nigeria interbank offered rate (NIBOR) also rose in tandem with the trend at the short-term market, with the 7-day fund rising to 13.54 percent from 11.08 percent last week.

The 30-day fund rose to 14.00 percent from 12.29 percent, the 60-day closed at 14.41 percent against 12.87 percent, while the 90-day ended higher at 14,87 percent from 13.37 percent.

Copyright Reuters, 2011