August 18, 2018

Interbank lending rate up on cash shortage

Interbank lending rate up on cash shortage

Nigeria’s overnight interbank lending rate rose week-on-week to an average of 3.5 percent on Friday, up from 1 percent last week, after central bank sales of treasury bills and deposits for dollar purchases drained liquidity in the banking system.

Nigeria raised 329.93 billion naira ($1.66 billion) worth of three-month to one-year treasury bills at an auction on Wednesday with higher returns than in its previous auction.

The central bank also directed commercial lenders on Tuesday to pay for their dollar purchases 48 hours in advance of its Thursday intervention in the official interbank forex market. This step also drained cash from the system and led to a hike in the cost of borrowing among banks.

The central bank usually intervenes once a week in the official interbank foreign exchange market to provide dollars for eligible importers, while it requires commercial lenders to fund its naira account 48 hours ahead of the intervention. Read more

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