CBN Sells T-Bills, Forex as Interbank Rate Rises to 20%
By Dipo Olowookere
In an effort to reduce excess liquidity following the release of second tranche of N243 billion of the Paris Club Refund to the 36 states in the country by the Federal Government earlier this week, the Central Bank of Nigeria (CBN), on Friday, sold N86.25 billion worth of 365-day and 195-day treasury bills.
At the close of the trading week, the interbank lending rate jumped to about 20 percent, from 5 percent on Thursday.
Traders informed Reuters that some banks initially quoted as high as 50 percent for overnight placement but this fell to around 15-20 percent toward the market close.
It was gathered that the auction and sales of treasury bills left some banks short of liquidity, forcing them to scramble for cash to pay for their purchases on the interbank market. That pushed up the cost of borrowing among lenders.
Also, the central bank announced that it plans to sell foreign exchange to business owners in the country.
In a notice to commercial banks on Friday, the apex bank disclosed that it would sell Dollars to manufacturers, airlines, fuel importers and agriculture businesses at a special auction to clear their backlog of foreign exchange obligations.