The Nigeria’s overnight naira interbank lending rate rose sharply to an average of 40 per cent on Friday, up from 15 per cent last week after the Central Bank of Nigeria (CBN) debited commercial lenders’ accounts for treasury bills and bonds purchases.
According to Reuters report monitored by Business247 News Online, dealers said the large cash withdrawal to settle debt purchases led to some commercial lenders scrambling for naira cash to meet their immediate obligations, pushing up the cost of borrowing among banks.
Nigeria raised 121 billion naira in an auction of local-currency bonds and 183 billion naira in short-dated treasury bills on Wednesday in a separate auction, while payment for the debt issues were due on Thursday and Friday, draining liquidity in the banking system.
Market liquidity was 128 billion naira in deficit on Friday after the central bank withdrawals, while the money market went into repo due to the naira cash shortage.
The CBN issues treasury bills and bonds as part of measures to fund government budget deficit, curb speculations against the local currency and help commercial lenders to manage liquidity in the system.
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