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Nigeria Overnight Rate Drops To 20 Percent As Cash Squeeze Bites | The Precision

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Nigeria’s overnight lending rate dropped to 20
percent on Thursday on expectation that a cash squeeze will ease after
money market rates more than doubled previous session. 

The Central Bank of Nigeria (CBN) has kept liquidity tight to support the currency, leaving
its benchmark interest rate on hold at 14 percent this year. It also
aims to keep rates high to attract foreign inflows into its bond market
to boost dollar liquidity. 
“The market is a bit tight because of FX purchases which mopped up (naira) liquidity,” one trader said. 
The
overnight rate closed at 44 percent on Wednesday after banking system
liquidity hit a debit of 265 billion naira, traders said. Tight
liquidity continued on Thursday with the market in debit of 243 billion
naira although the central bank repaid some treasury securities. 
Traders said money market rates dropped on Thursday as lenders accessed the central bank window for naira at 16 percent. 
Though
rates could go back up if a 60 billion naira treasury security offered
by the central bank on Thursday worsened the cash squeeze. 
The CBN is selling $100 million weekly to meet wholesale currency
demand and also a separate amount twice weekly for retail needs to keep
its multiple exchange rate system stable.
 
Reuters

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