Traders in the foreign exchange market, over the weekend said the interbank lending rates fell to 10.2 per cent on average on Friday, from 10.37 per cent last week after the Asset Management Corporation of Nigeria (AMCON) repaid matured bonds, which increase liquidity in the system.
It was gathered that AMCON on Friday repaid N867 billion ($5.24 billion) worth of bonds, cutting its liabilities to around N3 trillion. Dealers however said that 30 percent of the repaid bond — about N260 billion was expected to enter the system in the form of cash on Friday, while the balance would be in treasury bills, transferring that part of the liability to the Central Bank of Nigeria.
They also said the CBN had also repaid around N160 billion in matured treasury bills, while about N320 billion monthly budget allocations to government agencies hit the market last week, thereby buoying liquidity in the system.
However, the cash balance that bank held at the central bank opened around N552 billion on Friday, compared with N389 billion of the preceding week.
The open buy back rate eased to 10.15 per cent from 10.25 per cent last week, 1.85 basis points below the CBN’s benchmark interest rate of 12 per cent.
Overnight placements also fell to 10.25 per cent from 10.50 per cent last week.
Dealers said interbank lending rates were expected to remain stable at this level this week, with market liquidity set to rise further after the payment of the AMCON bond is reflected on bank balances held at the central bank on Monday.
AMCON was set up to absorb bad debts left over from a 2008/9 financial crisis that nearly bankrupted nine banks until the apex bank bailed them out to the tune of $4 billion, forcing many of them to restructure. There was no immediate comment from AMCON.
It would recall that Nigeria has experienced two severe episode of banking distress which had resulted into liquidation of over 60 banks.
Investigations reveal that most non-performing loans become bad most of the time not because the debtor cannot repay but does not want to pay, that is why the regulatory authorities devised a way to ensure that borrowers, who have capacity to pay, should pay, at least in the spirit of fairness and the sake of the economy.
