COST
of funds is expected to moderate downward this week, in response to inflow of
N177 billion from matured Treasury Bills (TBs).
This expectation is however
predicated on reduced or zero liquidity mop-ups by the Central Bank of Nigeria
(CBN).
Last week, the apex bank mopped up N364.2 billion from the interbank
money market through issuance of Open Market Operations (OMO) TBs. The Central
Bank of Nigeria, CBN, headquaters, Abuja
This comprised N116.2 billion OMO
bills sold on Monday and N248 billion OMO bills sold on Friday. In addition,
the apex bank sold primary market TBs worth N54 billion during the week, hence
the market experienced N418.2 billion outflow through TBs.
This, as well as
outflow to fund dollar purchases cancelled out the impact of N259 billion
inflows through matured TBs.
As a result, average short term cost of funds rose
by 1,250 basis points (bpts) when compared to the level in the previous week.
Data from the Financial Market Dealers Quote (FMDQ) showed that interest rate
on Collateralised (Open Buy Back, OBB) lending rose by 1,103 bpts to 20.83
percent at the close of last week from 9.8 percent the previous week.
Similarly, interest rate on Overnight lending rose by 1,400 bpts to 23.17
percent last week from 9.17 percent the previous week. Analysts however expect
this trend to reverse this week, due to inflow of N177 billion from maturing
TBs. “This week, treasury bills worth N177.31 billion will mature via secondary
market, hence, we expect moderation in interbank lending rates amidst ease in
financial system liquidity”, said analysts at Lagos based investment firm,
Cowry Asset Management Limited.
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