Nigeria’s interbank lending rate doubled to 10 percent on Friday as the central bank mopped up cash to curb speculation in the naira, traders said.
They said the government has injected 163 billion naira into the banking system this week to help cash-strapped states offset a funding crisis. The injection drove interbank rates as low as 5 percent on Thursday, before the central bank moved in.
The naira hit fresh lows of 240 against the dollar on the parallel market on Friday, as individuals converted local currency on the black market to dollars, fearing further naira weakness.
Traders said the central bank sold 179 billion naira in open market operation (OMO) bills on Thursday to drain liquidity while state-owned oil firm NNPC recalled some of its deposit with commercial lenders on Friday.
Lenders’ balance with the central bank reduced to 201 billion naira in credit, as against a credit balance of 390 billion naira a week ago, traders said.
“The system was initially liquid with rates down to 4 percent in the week,” one trader told Reuters.
The secured open buy back (OBB) rate rose to 10 percent from 4 percent last week, 3 percentage points lower than the central bank’s lending rate of 13 percent.
Overnight placement rose to 10.5 percent from 5 percent last week. Traders said rates could go up next week as liquidity thins out before Wednesday’s bond auction.Reuters
