By Odunewu Segun
With the raising of N256 billion in six-months treasury bills, N206 billion more than it had planned to issue, and at a higher yield of 18 per cent to soak up naira liquidity and attract foreign investors, the interbank overnight lending rate has increased from 10 per cent to 23 per cent.
According to traders, commercial banks were paying for treasury bill purchases and a foreign currency intervention, thereby reducing the amount of naira in the banking system. The central bank has been offering treasury bills at high rates to attract offshore flows into Nigeria, which has been hit by the fall in oil prices, prompting foreign players to flee bond and equities markets.
It has also been selling hard currency almost on a daily basis. “The central bank is trying to drive the economy with bills and bonds that they are offering securities at such high yields,” one trader said.
ALSO SEE: CBN directs BDCs not to sell FX above 2% margin
Nigeria has been battling with economic crisis, as a slump in oil revenues hammers public finances, causing chronic dollar shortages and triggering a contraction in the economy. The CBN governor, Mr. Godwin Emefiele, said recently that a recession is likely in the country.
The CBN also intervened on the currency markets after the naira hit an all-time low of N353.75 on the interbank market on Friday. By close, the naira was trading back at 310. The currency has been hitting new lows since this week.
Traders say banking system liquidity has been in debit for more than a week as the central bank continues to drain cash to support the currency. But it opened with a credit of 84 billion naira on Friday due to treasury bill maturities, they said.