Interbank Rate Falls As Matured Treasury Bills Are Paid Off | Independent Newspapers Limited
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Interbank Rate Falls As Matured Treasury Bills Are Paid Off

naira; banks lending; loan, devaluation
Posted: Sep 12, 2016 at 5:33 am   /   by   /   comments (0)

Nigeria’s overnight naira interbank lending rate fell to around 15 percent on Friday from a peak of 35 percent on Wednesday, after the central bank injected cash from matured treasury bills into the banking system, traders said, reports Reuters.

The central bank repaid around N293 billion in matured bills to some commercial lenders on Thursday, increasing liquidity and forcing down borrowing costs among banks.

The cost of overnight borrowing among banks had reached 35 percent on Wednesday after cash dried up. Some commercial lenders resorted to borrowing at the central bank discount window to help meet their immediate obligations.

The CBN has been selling dollars in the interbank forex market to support the ailing naira, and selling treasury bills to curb speculation against the local currency.

The central bank sold N139.42 billion of treasury bills in open market operations on Thursday at 18.5 percent, to reduce system liquidity. But the market cash balance remained up at N51.65 billion on Friday against an N87 billion deficit on Wednesday.

“We expect the rate to be trading around the 15 to 18 percent level this week if the central bank did not sell fresh treasury bills to mop up cash from the system,” one dealer said.

The overnight lending rate had closed penultimate week at 16 percent but gradually climbed to 35 percent on Wednesday, then eased marginally to 20 percent on Thursday after the cash from matured treasury bills reached the system.

Nigeria’s financial market will be closed for a public holiday today and tomorrow and will reopen on Wednesday.