LEADERSHIP
Written by:
Chima Nwokoji -Lagos
Cost of fund are expected to remain at the low levels throughout the year; a level it emerged from last week as businesses and other corporate organisations close down to prepare for the New Year.
Nigeria’s overnight lending rate eased marginally to 0.75 per cent on Wednesday from 1 per cent in the last five weeks after the central bank refunded cash set aside by banks to buy dollars.
Traders said the impact of the refund and anticipated injection of additional cash from November budgetary allocations to states and local governments also helped to reduce cost of borrowing among banks.
The secured open buy-back (OBB), the rate at which lenders can borrow from the interbank market using treasury bills as collateral, held flat at 0.5 per cent it has traded in the last five weeks, far below the central bank’s benchmark rate.
Traders said about N300 billion additional funds expected to have come in from the budget disbursal before the close of business on Wednesday.
They said although market liquidity dropped to around N230.5 billion on Wednesday from N400 billion on Friday before last, it was expected to rise again helped by the refunds and possible budget disbursals.
Meanwhile, fresh facts emerged last week that financial institutions including Deposit Money Banks are desperately searching for outlets to invest the over N1 trillion of excess cash in their vaults.
This anxiety was reflected in trading for treasury bills (government securities), where banks and other investors demanded for 291 per cent more bills than the amount offered for sale by the Central Bank of Nigeria (CBN) penultimate week.
Trading results show that banks and other investors demanded for N791.42 billion worth of treasury bills but the CBN offered N202.4 billion.
Analysis has shown that in the secondary market, where existing bills are sold, the CBN offered N50 billion worth bills (Open Market Operation, OMO) while investors demanded for N236.84 billion, out of which the apex bank accommodated N233.84 billion. At the Primary market, where fresh bills are sold, the CBN offered N152.4 worth of fresh bills, while investors demanded N554.58 billion, out of which the apex bank accommodated N155.4 billion.
This is in-spite of the lowering of interest rate CBN pays on bank’s excess cash deposited in its Standing Deposit Facility (SDF) to 4.0 per cent from 11 per cent on November 24th.
Since then banks have been battling with where to invest their excess cash. Investigation however revealed that volume of excess cash in bank’s vaults rose last week due to reimbursement for unmet demand for foreign excess exchange, and payment of matured treasury bills.
Nigeria’s overnight lending rate eased marginally to 0.75 per cent on Wednesday from 1 per cent in the last five weeks after the central bank refunded cash set aside by banks to buy dollars.
Traders said the impact of the refund and anticipated injection of additional cash from November budgetary allocations to states and local governments also helped to reduce cost of borrowing among banks.
The secured open buy-back (OBB), the rate at which lenders can borrow from the interbank market using treasury bills as collateral, held flat at 0.5 per cent it has traded in the last five weeks, far below the central bank’s benchmark rate.
Traders said about N300 billion additional funds expected to have come in from the budget disbursal before the close of business on Wednesday.
They said although market liquidity dropped to around N230.5 billion on Wednesday from N400 billion on Friday before last, it was expected to rise again helped by the refunds and possible budget disbursals.
Meanwhile, fresh facts emerged last week that financial institutions including Deposit Money Banks are desperately searching for outlets to invest the over N1 trillion of excess cash in their vaults.
This anxiety was reflected in trading for treasury bills (government securities), where banks and other investors demanded for 291 per cent more bills than the amount offered for sale by the Central Bank of Nigeria (CBN) penultimate week.
Trading results show that banks and other investors demanded for N791.42 billion worth of treasury bills but the CBN offered N202.4 billion.
Analysis has shown that in the secondary market, where existing bills are sold, the CBN offered N50 billion worth bills (Open Market Operation, OMO) while investors demanded for N236.84 billion, out of which the apex bank accommodated N233.84 billion. At the Primary market, where fresh bills are sold, the CBN offered N152.4 worth of fresh bills, while investors demanded N554.58 billion, out of which the apex bank accommodated N155.4 billion.
This is in-spite of the lowering of interest rate CBN pays on bank’s excess cash deposited in its Standing Deposit Facility (SDF) to 4.0 per cent from 11 per cent on November 24th.
Since then banks have been battling with where to invest their excess cash. Investigation however revealed that volume of excess cash in bank’s vaults rose last week due to reimbursement for unmet demand for foreign excess exchange, and payment of matured treasury bills.
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