inter-bank lending rates reduce

Lending among banks appears to be getting better with the Nigerian Inter-Bank Offer Rate (NIBOR) reducing significantly at the money market.But the Central Bank of Nigeria (CBN) continues to stretch its foreign exchange (forex) resources in an effort to meet demand.Available data at the inter-bank market showed that the 7-day NIBOR dipped to close the week at 13.25 percent, a 10-basis-point decrease from the previous week’s figure of 14.79 percent. Also, the 90-day NIBOR dipped to close the week at 16.40 percent, a five- basis-point decrease from the previous week’s figure of 17.33 percent.FSDH Weekly is confident that there will be increased activity at the government securities market this week, and therefore expects the inter-bank rates to moderate at the current levels. Meanwhile, maturities worth about N25 billion are expected to hit the system next week, even as the Federal Account Allocation Committee is likely to meet towards the end of next week.But in spite of the apex bank’s efforts to meet forex demand last week, the value of the naira slipped. It depreciated by 11 kobo and N2.00 to close the week at N146.01/$1 and N180.00/US$1, compared with the previous week’s figures of N145.90/$1 and N178.00/$1 in the official and parallel markets respectively. As of the time of this report, the inter-bank market remained closed by the CBN.However, auctions held at the Retail Dutch Auction System (RDAS) between Monday and Wednesday last week indicate that the CBN has spent much more than it earlier intended. At the auction held on Monday, May 04, 2009, the CBN offered $100 million, while it sold $114.05 million. The sale was 14.05 percent higher than what it offered. On Tuesday, May 05, 2009, the CBN offered $100 million, while it sold $131.59 million- the sale was higher than what it offered by 31.59 percent. On Wednesday, May 06, 2009, the CBN offered a total of $100 million, while it sold $149.50 million- the sale was higher than what it offered by 49.50 percent. In all, this week a total of $300 million was offered; while the apex bank sold $395.14 million- the sale was 31.71 percent higher than what it offered.The FSDH is confident that at the foreign exchange market, foreign exchange rate would remain relatively stable, as the CBN tries to meet all genuine demands and maintain the band at +/- three percent.According to the FSDH Weekly, as at the time of this report, there was no information about Treasury Bill (TB) transactions from the CBN. However, during the 91-day TB auction as at last week Thursday, April 30, 2009, the CBN did not offer nor allot any bill, but N10.11bn worth of TB was repaid.Also, at the 182-day TB auction last week, a total of N10 billion worth of TB was repaid.In all, last week there was total inflow of N20.11 billion from the primary segment of the money market.Also last week, at the secondary segment of the government securities market, a total of N222.05 billion worth of Repo & Expanded Discount Window (EDW) was injected, while N133.71 billion was withdrawn. This led to injection of about N88.33 billion from this segment of the market. The tenor days on the OMO Repo and EDW ranged from three days to 120 days, while the discount rate on the bills ranged between 8.25 percent and 12.75 percent.