Rates Stable as Banks Await MPC Outcome

22 May 2012

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CBN Headquarters

By Obinna Chima

Interbank lending rates, other money market rates were relatively stable Monday  as operators awaited the outcome of the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) meeting to be announced today.
The 226th MPC meeting, which commenced on Monday is expected to be concluded today.

At the interbank market, data made available by the Financial Market Dealers Association (FMDA) showed that while the overnight tenor climbed slightly by four basis points to 15 per cent yesterday, from 14.96 per cent on Friday, the 7-day tenor did not shift as it closed at 15.29 per cent.
Similarly, the 30-day tenor was stable as it maintained the 15.67 per cent it was the previous day.

The interbank market is a window for short-term borrowings among commercial banks to help the financial institutions manage liquidity and meet their obligation.

Hence, lack of adequate liquidity flows through this market has the potential to affect the financial sector. The direction of the interbank rates as well as the secured open buy back (OBB) are influenced by the MPC decision.

THISDAY had predicted that although the Monetary Policy Rate (MPR) and other monetary policy instruments might be left unchanged, a major outcome of the meeting would be for the apex bank to continue its restrictive monetary policy stance through the sale of treasury bills and periodic intervention with Open Market Operations (OMO) to mop up excess liquidity in the system.

At the last meeting held in March, the committee had left the MPR unchanged at 12 per cent, maintained the Standing Deposit Facility (SDF) and Standing Lending Facility (SLF) rates at 10 per cent (MPR-200 basis points) and 14 per cent (MPR+200 basis points), respectively. It had also left the cash reserve requirement (CRR) ratio at eight per cent.

Also, the average deposit and lending rates of commercial banks were stable. For instance, while savings deposit rate stood at 2.335 per cent yesterday, overnight rate at 2.48 per cent, strict call was at 3.05 per cent.
Meanwhile, the naira slipped by 23 kobo against the dollar at the interbank segment of the forex market, to close at N158.90 to a dollar, as against the N158.67 to a dollar it attained on Friday.

The development was once more hinged on the demand for the greenback by petroleum importers as well as increased demand by offshore investors.
Dealers revealed that just like last week Tuesday, the CBN intervened in the interbank market to control the volatility of the local currency.

At the regulated bi-weekly auction, the naira closes at N155.69 to a dollar; the same value it was at last Wednesday’s close.  The regulator supplied a total of $150 million to the 21 banks that participated in the auction, lower than the $200 million it offered at the last auction.

Tags: Business, Nigeria, Featured, Rates, MPC, Outcome

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