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The overnight tenor of the Nigerian Interbank Offered Rates (NIBOR) fell on Friday after the central bank repaid matured treasury bills and cash meant for government’s capital projects reached the system, traders said. Overnight lending rates fell to 11 per cent, below the central bank’s benchmark 14 per cent, from 15.5 percent the previous day. Rates had risen above 100 percent at the start of the week because of a central bank dollar auction, Reuters reported.
Traders said the bank repaid about N138.7 billion in matured treasury bills on Thursday to boost liquidity. They also said the market was flush with cash after the central bank sold fewer dollars than expected and returned excess naira. The central bank sold $313 million at a special auction meant to clear a backlog of dollar demand . Furthermore, traders said an unspecified amount of naira was released on Friday to fund government spending on capital projects and that additional inflows was expected before the end on the day. Nevertheless, the NIBOR is expected to reduce further in the coming days as inflows from federation allocation to the three tiers of government for the month of September that was shared last Thursday hit the banking system. The sum of N420 billion was approved for sharing at the Federation Account Allocation Committee (FAAC) meeting in last Thursday. The Permanent Secretary, Federal Ministry of Finance, Dr. Mahmoud Isa-Dutse, of the net statutory allocation, the federal government got the highest sum of N120.351 billion, states N61.044 billion while local governments received N47.062 billion. The sum of N13.729 billion went to oil producing states as their share of 13 per cent derivation. Meanwhile, the drag in system liquidity on the back of banks’ provisioning for FX forwards auction kept open buy back (OBB) and overnight lending rates at triple digits at the start of the week. However, the refunds for unsuccessful bids at the auction in addition to inflow from maturing treasury bills improved system liquidity levels. Afrinvest West Africa Limited in its analysis of events in the interbank Naira market last week, showed that with aggregate system liquidity at N84 billion deficit at the start of the week, OBB and overnight rates rose 21.7 and 16.7 percentage points to close at 125 per cent and 128.5 per cent respectively last Monday, remaining at last week’s triple digits close. Liquidity remained tight on Tuesday with rates at high levels; however, OBB and overnigh rates reversed uptrend by mid-week as both declined significantly by 132.8 and 133.0 percentage points to 18.9 per cent and 20.5 per cent respectively due to impact of the refunds for unsuccessful bids at the FX forwards auction which bolstered financial system liquidity. In addition, the inflow of net N138.2 billion in treasury bills maturities last Thursday further improved system liquidity, resulting in a 4.1 per cent and five per cent decline in OBB and overnight rates to close at 14.8 per cent and 15.5 per cent last Thursday. But activities in the treasury bills market started the week on a bearish note as sell sentiment was evident on the back of pressured financial system liquidity. Average treasury bills rate moved in similar mode to interbank money market rates as it inched higher in the first two trading sessions of the week but declined towards the end of the week on the back of a treasury bills maturity of N138.2 billion, closing at 17 per cent last Friday, down 62 basis points week-on-week.