By Dipo Olowookere
There was a huge surge in Nigeria’s overnight interbank lending rate on Friday compared with what was attained the previous week.
This, according to Reuters, was as a result of liquidity mop up by the Central Bank of Nigeria (CBN).
The country’s interbank rate increased to 29.5 percent on Friday, up from 19 percent the previous week, after the apex bank sold treasury bills to soak up liquidity from the banking system in a bid to curb pressure on the Naira.
Reuters quoted a trader to have said, “The interbank rate ranged between 20-50 percent intraday because of the huge amount of liquidity soaked out of the market by the central bank today, but the rate eventually closed at around 29.5 percent for the overnight.”
It was learnt that the CBN sold about N17 billion worth of open market operations (OMO) paper on Friday and also soaked up about N110 billion in bonds settlement.
About N87 billion in matured OMO bills was repaid by the apex bank on Thursday but this was less than the volume of cash outflow for treasury bills, bonds and forex purchases.
In order to soak up excess liquidity to curb pressure on the local currency, the Federal Government has recently stepped up the frequency of treasury bill sales.
This has left the market dry, while banks are now left to scramble for cash to cover their positions at higher borrowing cost.
