| LAGOS, April 21
LAGOS, April 21 Nigeria's interbank lending rate
climbed by around 20 percentage points on Friday after the
central bank's sale of dollar forwards to offset a backlog of
forex obligations drained cash from the money market.
The overnight lending rate stood at 50 percent against 29.33
percent the previous day because commercial lenders scrambled
for cash on Friday to pay for dollar purchase at a central bank
foreign exchange intervention auction targeting certain
The bank said on Friday it would offer dollar forwards to
offset foreign exchange obligations for manufacturers, airlines
and fuel importers as part of measures to improve dollar
liquidity and support the ailing naira.
The central bank has been intervening on the official market
to try to narrow the currency's spread with the black market
rate and this has also put pressure on naira liquidity in the
money market causing cost of borrowing among banks to jump.
The lending rate among commercial lenders opened at 70
percent on Tuesday, but fell to around 29.33 percent on Thursday
after the injection of cash from matured treasury bills
repayment by the central bank boosted liquidity.
Traders said market liquidity had opened at a 206.96 billion
naira deficit on Friday, compared with a deficit of 239.53
billion last week, putting the money market under pressure to
seek funds to finance their forex and treasury bill purchases
from the central bank.
"The money market is in repo because of the sales of open
market operations treasury bills and funding for special foreign
exchange auctions by the central bank, putting the market in a
tight position," one senior currency trader said.
The naira closed at 206 to the dollar on the interbank
market on Friday, the same level as the previous day, while it
traded at 385 to the dollar on the black market.
Traders said the cost of borrowing in the interbank money
market was likely to fall next week because of expected cash
injections from the next round of monthly budgetary allocations
to government agencies and repayment of matured treasury bills.
(Editing by Alexis Akwagyiram and Alison Williams)