Interbank rates at three-year low on new CBN rules

Interbank lending rates slipped to a three-year low after the central bank announced a restriction on the volume of idle cash that banks can place with it.

The Central Bank of Nigeria (CBN) on Thursday restricted lenders and discount houses from depositing more than 7.5 billion naira ($45.25 million) each, increasing interbank naira liquidity.

Interbank lending rates closed around 8 percent across the board on Friday, 2.2 percentage points lower than last week’s 10.2 percent.

Dealers said many banks were taken aback by the new limit on central bank deposits and were willing to place funds with borrowers at whatever rate.

Any amount deposited above the stipulated 7.5 billion naira by each bank will not attract any interest payment, the new rule specified. The regulator currently pays on 10 percent of cash deposited with it by banks.

Both Open Buy Back (OBB) and overnight placement with other banks were traded around 8 percent each on Friday, lower than 10.15 percent and 10.25 percent for OBB and overnight last week.

Dealers said interbank lending rates are expected to rise back to around 10 percent next week as banks adjust their lending to the new CBN rule.

Reuters