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Nigeria Sells Treasury Bills Worth 286.8bn Naira To Support Currency

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Nigeria’s central bank on Friday
held two auctions to sell treasury bills worth 286.8 billion
naira ($939.56 million), traders said, as the regulator moved to
tighten liquidity and curb speculation on the local currency.

Traders said the debt sale reduced the level of naira
liquidity in the money market and pushed up the overnight
interbank lending rate to 15 percent, up from 6.7 percent where
it closed the previous day.

Nigeria is battling a currency crisis brought on by low oil
prices which tipped its economy into recession and created
chronic dollar shortages.

The central bank has been intervening on the official market
in the last few months to try to narrow the spread between rates
on the official market and black market – where the local
currency trades around 30 percent weaker. It has sold about $5
billion since February.

The bank drained 200 billion naira on Friday in a 181-day
special treasury bill auction at 16 percent, traders said.

That sale was followed by an additional auction of 85.78
billion naira worth of 305-day treasury bills at 18.60 percent.
It also sold 1.05 billion of 174-day paper at 18 percent.

Traders said around 205 billion naira matured open market
operation (OMO) bills were repaid on Thursday, which initially
forced down the cost of borrowing among commercial lenders, but
this was reversed following Friday’s auctions.

“We expect the interbank lending rate to open next week at
today’s closing level and subsequently rise gradually as the
central bank sells more dollars on the foreign exchange market,”
one trader said.

The interbank rate reflects levels of naira liquidity in the
banking system.

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