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Nigerian interest rates climb after cash mop-up

Fri 9 May 2008, 15:33 GMT
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LAGOS, May 9 (Reuters) - Nigerian interbank interest rates climbed to 10.33 percent on average this week from 7.33 percent last week after an aggressive cash mop-up by the central bank, traders said on Friday.

The secured Open Buy Back (OBB) rose to 10 percent from 7.0 percent, overnight placement climbed to 11 percent from 7.5 percent and call money jumped to 11.5 percent from 7.5 percent.

The level of liquidity shrank after the regulator debited the accounts of some retail banks for cash reverses and huge sums were invested in treasury bills and bonds, traders said.

"The central bank has been mopping up aggressively, using various tools in line with its monetary policy committee decision to control money supply and curb inflationary growth," one banker said.

The central bank sold 55 billion naira worth of 91-day, 182-day treasury bills and 1-year bonds on Thursday in a step to curb money supply and tame inflation in Africa's top oil producer.

The cash crunch worsened after state oil firm NNPC recalled part of its cash deposits with some retail banks, dealers said.

Nigeria's broad money supply (M2) closed at 30.9 percent in 2007 compared to a 19 percent target, while inflation eased to 7.8 percent in March from 8.0 percent in February.

Bankers said interest rates could remain stable next week except there are cash inflows from government agencies to ease the prevailing cash crunch in the system.

(Reporting by Oludare Mayowa; Editing by Ron Askew)

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