Interbank Rates Rise On Naira Cash Shortage | Independent Newspapers Limited
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Interbank Rates Rise On Naira Cash Shortage

Posted: Sep 19, 2016 at 5:20 am   /   by   /   comments (0)


Nigeria’s overnight naira interbank lending rate rose sharply to an average of 40 percent on Friday, up from 15 percent penultimate week after the central bank debited commercial lenders’ accounts for treasury bills and bonds purchases.

Dealers said the large cash withdrawal to settle debt purchases led to some commercial lenders scrambling for naira cash to meet their immediate obligations, pushing up the cost of borrowing among banks.

The CBN raised N121 billion in an auction of local-currency bonds and N183 billion 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 N128 billion in deficit on Friday after the central bank withdrawals, while the money market went into repo due to the naira cash shortage.

The central bank issues treasury bills and bonds as part of measures to fund government budget deficit, curb speculations against the local currency and help commercial lenders to manage liquidity in the system.

“We see rates trading within the same range in the early part of this week, but they could fall later in the week due to anticipated repayment of matured treasury bills on Thursday,” one dealer said.