Interbank rate hits 15%, as government raises N190b through TB

The nation’s interbank overnight lending rate increased sharply by 10 percent to close at 15 percent on Friday, compare to 5 percent closed rate a week ago,
and this has been linked to the payment for Treasury Bills (TB) purchases by the commercial banks.

On Friday, the Federal government through the Central Bank of Nigeria (CBN) sold treasury bills worth a total of 190 billion naira ($670 million) with maturities ranging from three months to one year, with yields broadly flat.

The apex bank sold 28 billion naira of the 3-month treasury bills at 9.98 percent compared with 9.99 percent at the June 22 auction and 42 billion naira worth of the 6-month bill at 12.24 percent against 12.30 percent previously.

The bank sold 120 billion naira worth of the one-year paper at 14.99 percent, the same rate as at the last auction.

It worthy of notes that the federal government issues treasury bills as part of measures to finance the government budget deficit and also to help manage liquidity in the banking system.

However, market liquidity had opened at 167.26 billion naira on Friday, but the money market went into repo after the central bank sold treasury bills which significantly reduced level of cash in the banking system, pushing up cost of borrowing among banks.

“The market was trading around 10 percent for overnight placement prior to the sale of treasury bills, but rose sharply to an average of 15 percent shortly after the result of the auction was announced,” one dealer said.

Nigeria’s financial market was closed for trading from Tuesday to Thursday for a public holiday.

Although, traders said interest rate should open this week around same level of 15 percent but anticipate likelihood of easing a little with the expectations of injection of about 73 billion naira in matured treasury bills and payment of debt to government contractors.