Interbank lending rate jumps to record high

The overnight interbank lending rate soared to a record high
of 128 per cent on Monday on naira cash shortages after
commercial banks funded their account with the Central
Bank of Nigeria to participate in last Friday’s currency
forward auction.

Overnight rates opened at 100 per cent on Monday, traders
said, after the money market ended on Friday with no deals
as commercial lenders held onto naira to be able to
participate in the auction, Reuters reported.

Overnight money had traded at 14 per cent on Thursday.

The CBN has been tightening liquidity and intervening
directly with dollar sales to banks to support the ailing naira,
as the economy has been hit by the fall in oil prices.

The CBN had on Friday held a two-month dollar forward
auction to clear a backlog of demand from airlines,
manufacturers and other companies, as the naira crisis
deepened.

However, it debited customers’ naira accounts on the day of
the auction but would deliver the dollars in two months’ time,
traders said, adding that the move had soaked up liquidity
from the money markets

The central bank intervened again on Monday with dollar
sales to support the naira, which ended at 305.50 per dollar,
traders said.

Meanwhile, the Debt Management Office has borrowed
N95bn ($312.50m) at an auction of local currency bonds,
according to the DMO data

The DMO said the 2021 maturing debt attracted higher yield,
while the 2026 and 2036 papers fetched lower returns.

The debt office sold N10bn of the 2021 paper at 15.29 per
cent, compared with 15.14 per cent at the previous auction
last month.

The DMO had initially offered N35bn of the five-year bond.

It also sold N45bn of the 2026 debt at 15.47 per cent, lower
than 15.53 per cent, and N40bn of the 2036 debt at 15.48
per cent, compared with 15.59 per cent.

The debt office sold more than the initially advertised amount
of N35bn apiece for the 2026 and 2036 papers at the auction,
Reuters reported.

Investors had demanded yields ranging between 12 per cent
and 17 per cent for all the debts on offer, but the debt office
was not willing to pay more for the debts, one trader said.

The Federal Government has said it will borrow about
N900bn locally to finance part of the N2.2tn deficit in the
2016 budget.

The DMO issues local bonds as part of measures to finance
the government budget deficit and also to help manage
liquidity in the banking system.

The Central Bank of Nigeria has said it is planning to borrow
N1.77bn via Treasury bills in the last three months of the
year.

In its fourth quarter Treasury bill issuance programme, the
apex bank said it would raise about N815.37bn, comprising
91 days, 182 days and 364 days’ debt instruments.

In addition to the above, the central bank is also planning to
borrow about N952.05bn as rollover in the three categories
of the instruments.

The Federal Government distributes revenues from crude
exports and taxes among the three tiers of government every
month.

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