Nigerian interbank interest rates rose to 10.75 percent on average this week on aggressive cash mopping-up by the central bank, traders said. The rates ended last year at par with the 9.5 percent Monetary Policy Rate, but rose when trading resumed after the holiday because the regulator withdrew over 300 billion naira by compelling banks to buy Treasury bills. The secured Open Buy Back (OBB) closed at 10 percent on Friday from 9.5 percent, while overnight rose to 11.5 percent from 9.5 percent at the close of the market last year, traders said. No bank was willing to trade in call and tenor fund.

The liquidity mop-up was prompted by the release of about 270 billion naira in Dec budgetary allocations to the three tiers of government last week, dealers said. "The central bank immediately embarked on aggressive fund mop-up through sales of Treasury bills after the release of December budgetary allocation and this drained cash from the system," one banker said. A system glitch at the central bank which affected posting of banks position also contributed to higher interest rates at the interbank market, dealers said. The central bank often embarks on massive withdrawal of funds from the system to help control money supply and rein in inflation. Inflation rose to 5.2 percent in Nov, while broad money supply grew by 21.3 percent on annualised basis in nine months to Sept, versus a 19 percent target for 2007.