Nigeria’s overnight naira interbank lending rate jumped sharply to an average of 40 per cent on Friday, September 16, up from 15 per cent, last week, after the Central Bank of Nigeria, CBN, debited commercial lenders’ accounts for treasury bills and bonds purchases.
According to dealers, the large cash withdrawal to settle debt purchases led to some commercial lenders scrambling for naira cash to meet their obligations, pushing up the cost of borrowing among banks.
Nigeria raised N121bn in an auction of local currency bonds and N183bn in short-dated treasury bills on Wednesday in a separate auction, while payment for the debt issues were due on Thursday and Friday, draining liquidity in the banking system
Market liquidity was N128bon in deficit on Friday after the central bank withdrawals, while the money market went into red due to the naira cash shortage.
The apex bank issued treasury bills and bonds as part of measures to fund government budget deficit, curb speculations against the local currency and help commercial lenders manage liquidity in the system.
