There are strong indications that the interbank lending rates would trend higher this week as a result of Central Bank of Nigeria (CBN)’s effort to tighten liquidity in the system.

Traders in the market said the apex bank’s aggressive mop up would impact on cost of borrowing.

“The central bank seems to be aggressive in its efforts to tighten liquidity in the system, so we see rates trending higher next week as liquidity recedes due to treasury bills issuance,” one trader said.

Only last week, the interbank lending rates dropped further to an average of 13.50 per cent from 14.08 per cent the previous week as liquidity supported transactions, despite the central bank embarking on an aggressive mop-up.

Dealers said the market opened trading with a cash balance of about N290.64 billion ($1.82 billion), compared with a balance of about N168.58 billion the previous Friday.

“Rates were pretty low because of prevalent liquidity in the system and in spite of two sessions of open market operations which soaked some cash from the system,” one dealer said.

The secured open buy back (OBB) rate eased to 13 per cent from 13.75 per cent last week, 100 basis points above the central bank’s 12 per cent benchmark rate and 3.00 percentage points above the standing deposit facility rate.

Overnight placement fell to 13.50 per cent, from 14 per cent, last week, while call money dropped to 14 per cent, against 14.50 per cent.

Traders said the central bank sold about N81 billion in treasury bills last week, but its effect was minimal on the cost of borrowing among banks.