Lending rates in the interbank money market rose to 98 percent, yesterday, as scarcity of funds intensified.
According to data from Financial Marker Dealers Quote (FMDQ), lending rate rose for overnight borrowing to 92.58 percent from 80.17 percent Friday last week, indicating 15.47 percent increase. Similarly lending rate for secured borrowing rose to 88.33 percent from 76.67 percent indicating 13.2 percent increase.
The sharp increase in lending rates was triggered by huge outflows of cash from the interbank market last week Friday causing severe scarcity of funds in the market. Commenting on this development, the Ecobank Daily Market Update said, “The inter-bank rate rose by 6190 basis points on 13 February, reflecting inter-bank liquidity squeeze. Increased liquidity outflows driven by funding requirements for government securities, foreign exchange and statutory withdrawal for Cash Reserve ratio (CRR) weighed on the market.”
On the foreign exchange scene, the naira appreciated by 22 kobo against the dollar at the interbank foreign exchange market as the interbank exchange rate dropped to N198.88 per dollar yesterday from N199.10 last week Friday.
The appreciation, according to Mr. Kunle Ezun, currency analysts was prompted by the measures announced by the CBN on Friday to curb speculation in the interbank market and satisfy genuine foreign exchange demand. To curb speculation, the CBN had request that banks should first approach it for dollars to meet demands by customers before going to the interbank market to source for dollars to meet such demands. Vanguard