Cost of funds rose sharply in the interbank money market last week in response to outflow of N451 billion to fund in investment in government securities.
Vanguard investigations revealed that interest rates on short term funds, which opened the week at 11 per cent rose to 16 per cent at the close of business on Friday. This was due to scarcity of funds triggered by outflow of N451 billion comprising N292 billion investment in treasury bills and N160 billion investment in FGN bonds as well as purchase of foreign exchange via the special dollar sales by the Central Bank of Nigeria (CBN).
Analysis of treasury bills and FGN Bonds offered during the week indicated oversubscription prompted by the attractive interest rates on the instruments. The N160 billion worth of FGN bonds offered by the Debt Management Office (DMO) recorded 35 per cent oversubscription, with total public subscription at N216 billion. The FGN bonds were issued at an average interest rate of 16.2 per cent, while bid rates ranged from 15.5 per cent to 17 per cent.