The cost of borrowing has gone up by almost 100percent at the interbank market. The lending rates among banks, as Open Buy Back (OBB) and Overnight rates soared significantly upward by 550bps each to close at 10 per cent and 11.25 per cent from five per cent and 5.75 per cent respectively. Some banks had quoted 20 percent lending rate at the interbank market.
The rise in interbank rate was propelled by the sale of N392 billion treasury bills by the Central Bank of Nigeria (CBN) as part of its effort to mop up excess liquidity from the system. The apex bank auctioned N30 billion in 181-day bill, but eventually sold N82.619 billion at a stop rate of 18 percent. It also offered N60 billion in 342-day and sold N309.06 billion at a stop rate of 18.6% percent.
Market opened on Thursday, February 2, with a surplus liquidity of about N467 billion due to an injection of matured Treasury bills until the central bank later debited banks for the purchases of N302.4 billion in primary market Treasury bills.
According to SCM Capital, “activity in the Treasury bill space responded to the OMO auction offered by the CBN today. The market earlier commenced on a bearish note with sell-offs noticed majorly on the maturity offered at the auction (August 3, 2017) which moved up 30-40bps from 17.40% to 17.80%.
“Demand however filtered on the short dated papers which eventually closed by 20-30bps lower than their previous levels.
“The bond market witnessed a steepened yield curve despite few transactions. There were reports that most traders were cautiously trading on the 10-year and 20-year paper with the primary auction in view.”
Meanwhile, at the inter-bank, the Naira exchange rate closed flat at N305.25/$, as CBN maintained its daily intervention of $1.5 million, while the parallel market also closed at N498/$.
By Dike Onwuamaeze