Nigerian interbank lending rates eased to 1.1 percent on average this week from 1.66 percent last after the release of large budgetary allocations to government agencies raised liquidity in the system
“The system is presently awash with cash because of the disbursement of over 300 billion naira ($2 billion) in budget allocations to the three tiers of government this week,” one dealer said.
The secured Open Buy Back (OBB) dropped 45 basis points to 1.05 percent from 1.50 percent last week, 5 basis points above the Standing Deposit Facility (SDF) rate and 4.95 percentage points below the 6 percent central bank benchmark rate.
Overnight placement fell to 1.10 percent from 1.75 percent, while call eased to 1.15 percent from 1.75 percent previously.
Nigeria last Friday announced the distribution of 704 billion naira from central accounts to the three tiers of government — federal, state and local — for the month of July.
A portion of the funds meant for state and local governments hit the system this week.
Traders said the opening balance in lenders’ account with the central bank was in excess of 400 billion naira by Friday.
“We are anticipating the further release of about $1 billion from the excess crude account next week and this could keep rates low for the rest of the month,” another dealer said