Interbank Rate Surges to 6% as Market Liquidity Crashes to N232.9billion

Traders said liquidity level stood around N232.85 billion ($1.17 billion) last week, down from N414 billion two weeks ago.

The Central Bank of Nigeria (CBN) sold N167.51 billion ($841.76 million) worth of debt with maturities ranging between three months and one year, while payment for the purchase is due on Friday.

Traders said the cost of borrowing among banks declined progressively last week from previous week’s close after the CBN asked commercial lenders to make provisions for foreign exchange purchases, and the fact that no cash was flowing into the banking system.

“We expect that rate will decline to around two to 2.5 per cent level next week in anticipation of the disbursal of budget allocations to government agencies,” one trader said.

Traders said about N199 billion to N200 billion is expected to be injected into the banking system this week through budget allocation.

Traders said overnight lending was priced lower by fund takers because many of them had expected the injection of the budget cash on Friday, but resistance from major fund placers kept the rate at the prevailing level. The interbank rate reflects the level of naira cash liquidity in the banking system.