Nigeria’s overnight lending rate dips to 14% as CBN tightens measures

Nigeria’s overnight interbank lending rate fell to 14 percent on Friday from 22 percent last week after the Central Bank of Nigeria repaid matured treasury bills, injecting cash into the banking system, traders said.

Traders said the bank injected around 140 billion naira ($444.98 million) through its pay-out of matured open market operations bills, which helps lower borrowing costs among banks.

The cash helped money-market liquidity, traders said, despite bond and Treasury bill sales this week. The debt office raised 39 billion naira with local currency bonds and 120 billion in short-dated treasury bills this week.

The overnight lending rate had risen earlier this week to peak at 30 percent on Wednesday due to tight liquidity. It fell on Thursday following cash injections from matured treasury bills.

Traders expect borrowing costs to rise slightly next week as liquidity drains away.

Meanwhile, the naira is expected to trade in a tight range at the official and parallel markets next week as the Central Bank of Nigeria struggles to curb speculation on the local currency and reduce pressure on the dwindling external reserves.

The naira was quoted at 465 against the dollar at the parallel market on Friday, lower than 460/dollar recorded last week. At the official interbank market, the naira was quoted at 314.80/dollar.

“The central bank has intensified its effort to manage the exchange rate at the present level by influencing how the scarce dollar is sold at the parallel market, while selling dollar daily at the interbank market to keep it from falling further,” a trader at one of the commercial banks told National Daily.

Recalled that the CBN sold N119.92bn ($394.21m) in short-dated treasury bills at an auction on last week, with mixed yields, data from the central bank showed on Friday.

The bank sold a total of N32.43bn of the three-month paper at 13.99 per cent, broadly unchanged from 14 per cent at the last auction on November 2.

It sold N22.82bn of the six-month debt at 17.40 per cent, down from 17.50 per cent at the previous auction, while a total of N64.67bn of one-year bills was sold at 18.70 per cent, compared with 18.30 per cent previously.

Total subscriptions rose to N158.07bn, compared with N122.96bn at the last auction, the data showed