Nigeria interbank rates up after interest rate hike

Fri May 27, 2011 2:46pm GMT

[-] Text [+]

* Interest rate hike pushes up cost of borrowing

* Interbank rates seen inching up further

By Oludare Mayowa

LAGOS, May 27 (Reuters) - Nigerian interbank lending rates climbed to 10.58 percent on average this week from 9.16 percent last week after the central bank lifted its benchmark interest rate, traders said on Friday.

The central bank raised the rate to 8.0 percent from 7.5 percent on Tuesday, citing a need to rein in inflation and control surging liquidity that has led to mounting foreign exchange demand and piled pressure on the naira currency NGN=D1.

The secured open buy back (OBB) rose to 10 percent from 8.75 percent last week, 200 basis points above the benchmark rate and 4.0 percentage points over the standing deposit facility (SDF) rate.

Overnight placement jumped in tandem to 10.75 percent from 9.25 percent, while call money closed at 11.0 percent against 9.50 percent last week.

The market opened on Friday with a balance of 208 billion naira ($1.3 bln) as a result of an inflow after some government agencies paid staff, but the impact of the interest rate hike still pushed up lending rates among banks. Continued...

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