Interbank lending rate drops to 20% amid cash squeeze


…As Pension fund assets rise by N862bn***

The nation’s overnight lending rate dropped to 20 per cent on Thursday on expectation that a cash squeeze will ease after money market rates more than doubled previous session.

The Central Bank of Nigeria has kept liquidity tight to support the currency, leaving its benchmark interest rate on hold at 14 per cent this year.

The CBN also aims to keep rates high to attract foreign inflows into its bond market to boost dollar liquidity.

“The market is a bit tight because of FX purchases which mopped up (naira) liquidity,” one trader was quoted by Reuters as saying.

The overnight rate closed at 44 per cent on Wednesday after banking system liquidity hit a debit of N265bn, traders said.

Tight liquidity continued on Thursday with the market in debit of N243bn, although the central bank repaid some treasury securities.

Traders said money market rates dropped on Thursday as lenders accessed the CBN window for naira at 16 per cent.

Though rates could go back up if a N60bn treasury security offered by the central bank on Thursday worsened the cash squeeze.

The CBN is selling $100m weekly to meet wholesale currency demand and also a separate amount twice weekly for retail needs to keep its multiple exchange rate system stable.

It injected a total of $195m into the interbank foreign exchange market on Monday, almost one week after it intervened in the market with the sale of $195m.

The naira has remained unchanged at 363 against the dollar in recent days.

Reuters quoted traders as saying that the local currency would likely hold ground across its multiple exchange rates next week following CBN’s intervention in the official market to boost dollar liquidity.

The local currency has traded at around 360 per dollar for investors with a volume of almost $600m this week.

On the official market, where the central bank has been selling $500,000 daily to lenders, the naira firmed slightly to 305.55 per dollar at 3:00pm on Thursday.

In the meantime, the latest report on the Nigerian pension fund administration, which was released on Thursday by the National Bureau of Statistics and the National Pension Commission, indicated that the country’s pension fund assets increased by N862bn to N6.164tn as of December 31, 2016.

According to the report, the N6.164tn pension fund assets represent six per cent of the country’s Gross Domestic Product, as the figure indicates an increase of N862bn when compared to the N5.302tn recorded in 2015.

It stated that a large percentage of the fund was invested in the domestic market, while the remaining part was invested abroad.

The report stated, “The Nigerian pension fund administration data for 2016 reflected that the pension fund asset under management as of December 31, 2016 stood at N6,164.76bn as against N5,302.82bn in 2015.

“The total asset as at the period under review represents six per cent of the GDP as against 5.57 per cent in 2015. 98.56 per cent of the funds were invested in domestic market while the remaining 1.44 per cent were invested in foreign market.”

The PenCom stated that the Federal Government of Nigeria debt securities had the highest weight percentage of 71.28 of the total pension fund assets.

This, it noted, was closely followed by ordinary shares, with 9.48 per cent weight; and money market securities, with 6.51 per cent weight; while infrastructure funds had the least with 0.03 per cent weight.

“Participants within the age distribution below 40 years have the highest percentage composition by sector and gender. These are closely followed by participants within the age brackets of 40 to 49 years and 50 to 59 years, respectively, while participants above 60 years have the least percentage composition by sector and gender,” the report stated.