Nigeria’s interbank overnight lending rate jumped to 23 percent on Friday from 10 percent its previous close, after the central bank sold treasury bills at higher yields to lure foreign investors, traders said.
Commercial banks on Friday were paying for treasury bill purchases and a foreign currency intervention, traders said, thereby reducing the amount of naira in the banking system.
The central bank has been offering treasury bills at high rates to attract offshore flows into Nigeria, which has been hit by the fall in oil prices, prompting foreign players to flee bond and equities markets.
It has also been selling hard currency almost daily.
“The central bank is trying to drive the economy with bills and bonds that is they are offering securities at such high yields,” one trader said.
The West African nation is in the middle of its worst crisis in decades as a slump in oil revenues hammers public finances, causing chronic dollar shortages and triggering a contraction in the economy. The central bank governor has said a recession is likely.
The regulator raised 256 billion naira in six-month bill on Friday, 206 billion naira more than it had planned to issue, and at a higher yield of 18 percent to soak up naira liquidity and attract foreign investors back to the country.
It also intervened on the currency markets after the naira hit an all-time low of 353.75 on the interbank market on Friday. By close, the naira was trading back at 310. The currency has been hitting new lows since this week.
Traders say banking system liquidity has been in debit for more than a week as the central bank continues to drain cash to support the currency. But it opened with a credit of 84 billion naira on Friday due to treasury bill maturities, they said.
Nigeria plans to raise 110 billion naira in local currency denominated bonds on August 17. It is also seeking advisers and bookrunners to manage a planned $1 billion eurobond it intends to offer this year.
