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Nigerian interbank rates rise on liquidity tightening

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Adesola, Standard Chartered Ceo

Nigerian interbank lending rates rose this week to an average of 10.75 percent from 10.25 percent last week, as the central bank aggressively mopped up liquidity to curb inflation and speculation in the local currency.
“The central bank has consistently issued Open Market Operation (OMO) debt notes this week to soak liquidity from the banking system,” one dealer said.
Traders said the bank issued about 170 billion naira ($1.05 billion) worth of OMO treasury bills to absorb excess cash in the banking system, driving up interest rates among banks.
The cash balance that lenders hold at the central bank fell to 348 billion naira surplus on Friday compared with 411 billion naira last week Friday.
The open buy-back (OBB) inched up to 10.50 percent from 10.25 percent last week, 1.5 percentage points below the central bank’s benchmark rate of 12 percent.
Overnight placement rose to 10.75 percent against 10.25 percent last week. Call money increased to 11 percent from 10.25 percent previously.
“We expect more liquidity tightening next week with rates rising further,” another trader said.
Nigeria plans to issue 137.97 billion naira worth of treasury bills on June 4 at maturities ranging from three months to one year, the central bank said on Wednesday. That is expected to further deplete cash in the banking system and push up of cost of lending among banks.

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