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Nigerian interbank rate jumps on cash shortage

By on April 15, 2017

Nigerian interbank lending rates rose by around 100 percentage points yesterday, as commercial lenders scrambled for cash to pay for bond purchases and cover their positions, traders said.

Overnight lending rates rose to around 300 percent from 200 percent at the end of Wednesday, as naira liquidity dried up in the system and some banks were forced to borrow from the CBN.

Nigeria raised N105.32 billion ($345m) from bond sales this week, and payment for the debt sale was due on Thursday, draining liquidity in the market and pushing further up the cost of money in the market.

“The market is currently short of funds with major placers asking for a higher rate on their money as a result of pressure from those who need cash to cover their positions,” one trader said.

The central bank has consistently sold dollars at both the spot and forward markets, and required banks to pay for the purchase. This has drained liquidity in the market. Nigeria’s financial markets will close until April 18 for public holiday.