* Nigeria naira under pressure since devaluation
* Low oil prices lead investors to dump Nigeria assets
* Africa's biggest economy faces February election (Adds details)
By Chijioke Ohuocha
LAGOS, Dec 8 (Reuters) - Nigeria's overnight lending rate more than doubled to a record high of 70 percent on Monday, amid a cash squeeze after the central bank last week soaked up naira liquidity to support the ailing currency, dealers said.
The bank is struggling to prop up the naira, which has taken a beating over the past few months as falling oil prices shook confidence in the assets of Africa's leading energy producer. Oil hit a five-year low on Monday.
"Banks are scrambling for funds to cover their positions," one dealer said.
The naira eased 1.1 percent on Monday, below the central bank's new target since an 8 percent devaluation two weeks ago to save declining foreign reserves, despite the bank selling dollars onto the market.
As the bank has been forced to tighten monetary policy to defend the currency, it also risks hurting Africa's biggest economy as high interbank rates will constrain credit growth and could create bad loan problems for lenders, analysts say.
"The tighter monetary policy -- higher cash reserve requirement as well as higher policy rate -- will filter through to the real economy via an increased cost of borrowing," said Melissa Verreynne of NKC Independent Economists, adding that the spike in overnight rates was likely to be short lived.
The timing is bad for President Goodluck Jonathan, who will seek re-election in polls scheduled for Feb. 14.
Overnight lending rates had spiked to 30 percent on Friday, a level itself more than double what rates were a week before.
Dealers said commercial lenders were scrambling for funds on the interbank market on Monday to keep their liquidity ratios at the regulatory minimum of 30 percent, after the central bank last week withdrew 300 billion naira ($1.7 bln) to enforce a new cash reserve requirement of 20 percent, up from 15 percent.
The naira closed at 182.10 naira to the dollar, after it touched an intraday low of 184.57 naira, prompting the central bank to intervene. The unit closed at 180.10 naira on Friday.
Dealers said China's Addax petroleum also sold $11 million to lenders, which was not sufficient to meet demand.
The balance that lenders hold with the central bank closed at a debit of 20 billion naira on Monday, compared with 45 billion naira on Friday. The banking system was about 400 billion naira in credit two weeks ago.
The bank also raised interest rates by 100 basis points to 13 percent, the first change in more than two years, and it debited 568 billion naira from the banking system. (Additional reporting by Oludare Mayowa; Editing by Tim Cocks and Toby Chopra)