Nigeria’s overnight lending rates climbed to 20 per cent as the Central Bank of Nigeria, CBN, sold about N283 billion ($877.11 million) worth of treasury bills to mop up liquidity, driving up interbank lending rates, traders said on Friday, October 7.
The lending rates later dipped to 16 per cent towards before the market closed because the banking system was still in credit to the tune of around N17.44 billion, Reuters reported.
The bank had earlier repaid N160.64 billion worth of matured bills but sold a higher amount to drain liquidity, traders said. It sold the one-year bill on Friday at a rate of 18.5 percent.
In September, the apex bank sold Open Market Operations (OMO) bills to soak up about 1.2 trillion naira, in a bid to curb speculation against the currency and shore up fixed income yields to attract investors.
The central bank has said it will keep interest rates tight to attract foreign currency and resolve a chronic dollar shortage brought on by a slump in oil prices.
The CBN Governor, Mr. Godwin Emefiele recently said the bank will pursue price stability as an anchor for economic growth as well as to attract foreign investors as the country battles recession and rising inflation. Emefiele said in an interview with The Banker Magazine.
“The CBN does not reckon that curbing inflation, attracting foreign investors and supporting growth are mutually exclusive objectives. Rather, the monetary policy committee’s decision reflects the (central bank’s) prioritisation of its core mandate of pursuing price stability as an anchor and enabler for economic growth.
“As we have consistently said, the bank will continue to ensure that its decisions not only consider price and financial system stability, but also issues of employment and growth.”
He restated that the reintroduction of a flexible exchange rate system has helped increase transparency in the FX market, cleared an estimated $4 billion backlog in FX demand, reduce arbitrage and speculative opportunities, and create a more predictable structure for businesses to prioritise their FX demand, we believe that this policy has been beneficial to the economy