Lending rates hit 98% percent in interbank market

Lending rates hit 98% percent in interbank market

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.