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Respite to liquidity constraints is yet to return to banks even as the Central Bank of Nigeria’s (CBN) monetary measures last week pushed up interbank rates across the indices. 
The CBN, through its Open Market Operation (OMO) measures, further depressed available cash in the interbank market, pushing up interbank rates as at end of last week. According to the FSDH Securities Limited reports on the Nigerian money market for the week ending July 3 2009, there was a net total outflow of N65.49 billion from the primary and secondary segment of the government securities market.
At the secondary segment of the government securities market, a total of N47.94 billion worth of EDW (Expanded Discount Window) was withdrawn, while N27.55 billion was withdrawn from the system through OMO auctions. The OMO auctions had tenor days ranging from 84-213 days, and the discount rates on the bill ranged from 3.64 percent to 5.74 percent.
These measures no doubt affected primary market indicators as the Nigerian Interbank Offer Rate (NIBOR) shot up. Figures from FSDH are that the 7-day NIBOR closed the week at 21.58 percent, a 158 basis point increase from the previous week’s figure of 20.0 percent, while the 90-day NIBOR closed the week at 21.87 percent, a 45 basis point increase from the previous week’s figure of 21.42 percent.
This factor, which analysts say indicates the increase in the demand for cash against supply, was made worse by CBN’s retraction of funds from the system.
Analysts assert that the increase across some of the interbank rates is indicative of the increased demand for cash in place of other forms of assets by banks, and their subsidiaries for their mid year reports ahead of the common year end.
Though the CBN had earlier injected liquidity into the system the previous week, the effect was eroded with last week’s policy measures. For the previous week ended June 26, the CBN repaid a total of N10 billion worth of bill at the 182-day Treasury bill auction, leading to an inflow of N10 billion from that segment of the market. 
By implication, the CBN lubricated the money market with N10 billion through the purchase of the 182-day treasury bills as at that week.
Meanwhile, at the foreign exchange market, CBN offered $150 million, same as it offered in the previous week at its auction held on Monday, June 29, while it sold a total of $81.29 million. The sale was 45.81 percent lower than what was on offer. 
On Wednesday, July 01 2009, CBN offered $150 million while it sold $70.07 million; the sale was 53.29 percent lower than what was offered. In all, a total of $300 million was offered, while $151.35 million was sold last week; the sale was 49.55 percent lower than what was offered within the week.
As a result of increased supply of the dollar over demand, value of naira appreciated in all the three segments of foreign exchange market during the week, and at the parallel inter-bank and official markets, value of the naira appreciated by N5.50, N1.07 and 6kobo to close the week at N155.00/$1, N147.30/$1 and N146.70/$1, this is compared with the previous week’s figures of N160.50/$1, N148.37/$1, and N146.76/$1 respectively.
Results of the foreign exchange transactions in analysts’ opinion signify a return to a stabilised regime, especially as the earlier disparity between the official and parallel market rates are fast closing. 
However, liquidity in banks is yet to abate and continues to raise misgivings. This is particularly so as adequate liquidity in banks is necessary to drive credit obligations, and encourage economic activities in the country.
To buttress this importance, the International Monetary Fund (IMF) First Deputy Managing Director John Lipsky said in a speech that despite some normalisation of inflation expectations, monetary policy should remain expansionary for the time being, including through “unconventional measures” where needed. 
He noted that together with budgetary support, low policy interest rates and steeper yield curves will help strengthen financial institutions’ earnings and balance sheets, which would hopefully boost lending to the private sector. 
Admitting that monetary policy has been relatively successful in normalising conditions in money markets across economies, Lipsky noted that it was too early to draw firm conclusions, but that there is a need to avoid new vulnerabilities further down the road now that the danger of a total financial system collapse has receded.
According to him, there is an ongoing policy support that would be crucial in laying down firmer foundations for renewed growth, including the restoration of financial sector’s health.
Such assertion signifies the major challenge on the CBN to ensure that there is adequate liquidity in the banking system, and is accessible by borrowers at a considerably low rate.
FSDH Research on its part believes that the Nigerian monetary authority is implementing good measures, to ensure that the financial system remains strong and healthy in order to act as a catalyst for economic growth.  
It however notes that there is a need for the fiscal authorities to embrace good information and communication process so that the private sector does not receive a wrong signal that will further weaken their confidence in the national economy.