Interbank rate climbs as banks face liquidity challenges
Nigeria’s money market liquidity plunger further on Tuesday to a little over N50 billion negative, pushing the cost of borrowing among banks up by 50 basis points to 21.50 percent for overnight lending, traders said.
Also, illiquidity in the market slowed bids at the foreign exchange market with the exchange rate of the naira held steadied at the official rate and investors and exporters’ (I&E) window at N386.50 per dollar at the close of the market.
Reuters also reported that there were no quotes for the naira on Nigeria’s official market for the second consecutive session on Tuesday.
According to the agency, the currency trading platform Refinitiv Eikon data showed not quote for the local currency, after the central bank last week depreciated the currency at an auction.
Traders told the Global Financial Digest liquidity in the Nigerian interbank market which crashed to open the day at N96 billion negative, improved to around N54.69 billion at the close of the market after the CBN injected N18 billion in matured OMO bills into the market.
Banks were said to have scrambled for funds at the CBN’s Standing Lending Facility (SLF) window, with the borrowing from the regulatory bank’s SLF hit about N350.61 billion at the close of the market on Tuesday.
Traders said there were very few transactions in the market on Tuesday due to the widespread illiquidity in the market, which affected most banks.
The naira closed flat at N386.5 per dollar on the I&E window while it closed around N461 to the dollar on the bureau de change market. The CBN continues to retain its exchange rate at N360 to the dollar on its website despite claimed in the market of a devaluation to N381 to the dollar on Friday.