Interbank Rate Surges to 15% Over Bond payments

The interbank overnight lending rate jumped for the second consecutive on Friday, July 15 to an average of 15 per cent from 10 per cent a week ago, as banks scurried for liquidity to settle bond purchases.

Total banking system liquidity opened at N137.30 billion, but payment for bonds significantly reduced the level of cash in the market, leading to a sharp rise in the cost of borrowing among commercial lenders.

Traders told Reuters some banks actually quoted as high as 50 per cent for overnight placement in early trade in their quest to get cash to pay for their bond purchases.

A dealer said:“We see the market trading around this level next week because of anticipation that some banks would prefer to go to the discount window to borrow at a cheaper rate of 14 percent,” one dealer said.

Demand for cash however dropped after the central bank refunded about 40 billion naira in cash reserve ratio to some banks.