Money Market Rates Rose August on Account of CBN’s Hawkish Posture

The average money market rate was higher in August, compared to July as the Central Bank of Nigeria (CBN) embarked on a more aggressive monetary policy stance to manage the liquidity in the market in a more cost effective way. Inter-bank rates moved widely in the first week of August due to the debit of the Cash Reserve Requirement (CRR) of 50 percent imposed on public sector funds in the system. However, rates moderated downwards to end the month of August due to maturities repayment.
The FSDH said 7-Day Nigerian Int-Bank Offer Rate (NIBOR) opened the month of August at 11.50 percent, but the Monetary Policy Committee (MPC) decision to raise the CRR on public sector deposit to 50 percent and the eventual debit of the banking system on August 07, 2013 led to a spike in average NIBOR, with the 7-day hitting a year high of 20.29 percent,  825 basis points increase from 12.04 percent on August 06, 2013 but eventually trended downwards to end the month at 12 percent, a 50 basis points increase from 11.50 percent as at end-July. Similarly, the 90-Day NIBOR recorded the same trend as it opened the month of August at 12.54 percent, and shot-up by 896 basis points to a year high of 21.50 percent on August 07, 2013 and settled at 13.17 percent as at end-August, a 63 basis points increase from end-July figure.

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