Nigerian interbank rates moved up slightly to 12.75 percent on average this week from 12 percent previously on a cash squeeze that forced many bankers to borrow to cover their positions, bankers said on Friday. The secured Open Buy Back (OBB) fell to 10.25 percent from 10.50 percent, while overnight was flat at 13.5 percent, but some banks traded in call money at 14 percent.

Dealers said only a few major fund placers were in the market this week, while there were no big cash inflows into the system from other sources." The market was short by about 210 billion naira, putting many banks under pressure to borrow at whatever cost to cover their positions," one dealer said. Nigerian banks depend largely on the monthly disbursement of public funds to finance their operations and a major swing in liquidity usually leads to a shortage and causes rates to climb.

Lending rates have climbed because there have not been any major releases of budgetary allocations in the last three weeks. Dealers said the rates should drop next week on the expected release of part of Nigeria's oil windfall savings to the three tiers of government. Payment on matured treasury bills in the week ahead is also expected to provide some relief for the market, bankers said.