Nigeria’s overnight interbank rate soared to a record high of 150 per cent on Tuesday, two days after commercial banks placed funds with the Central Bank of Nigeria (CBN) to participate in last Friday’s currency forward auction.
Traders said few deals were done on Tuesday due to a shortage of naira on the money market, with banks unwilling to place funds among themselves until the result of Friday’s currency auction was published.
On Friday, the CBN held a two-month dollar forward auction to clear a backlog of demand from airlines, manufacturers and other companies, as the exchange rate crisis deepened.
Traders said the banks were later directed by the CBN to re-submit bids again on Monday.
National Daily gathered that rates spiked because banks were barred from the CBN’s repo window before any currency auction. The CBN had not announced result of the auction as of Tuesday.
“Most banks are not quoting rates because they are still waiting for the result of the FX auction,” one trader said.
The regulator has been tightening liquidity and intervening directly with dollar sales to banks to support the ailing naira, hit by the fall in oil prices, the nation’s economic mainstay.
Overnight rates closed at 128 per cent on Monday after they opened at 100 per cent, up from 14 per cent on Thursday.
The money market ended with no deals on Friday as lenders held onto naira to be able to participate at the auction.
The overnight interbank lending rate soared to a record high of 128 per cent on Monday on naira cash shortages after commercial banks funded their account with the Central Bank of Nigeria to participate in last Friday’s currency forward auction.
Overnight rates opened at 100 per cent on Monday, traders said, after the money market ended on Friday with no deals as commercial lenders held onto naira to be able to participate in the auction, Reuters reported.
Overnight money had traded at 14 per cent on Thursday.