Lending rate eases as Naira gains 12 points in one week

As Deposit Money Banks (DMBs) anticipate fresh inflows from state governments next week, the overnight lending rate eased to 12 percent, just as the nation’s currency, the Naira gained a total of 12 points in one week of trading at the parallel segment of the foreign exchange market.

The overnight rate is generally the interest rate that commercial banks use to borrow and lend from one another in the overnight market, and at the beginning of the week it was opened at 15 per cent but eased by three percent to close at 12 per cent on Friday.

However, the naira on Monday 13th March, 2017, traded at 460 to a dollar but strengthened day by day to close at 448 at the end of the week.

Checks by our correspondent showed that the local currency on Tuesday remained unchanged at 460 per US dollar but gained slightly the next day to close at 459, but appreciated by four points on Thursday, exchanged at 455 against the Greenback at the unofficial rate. And as at Friday, 17th March, when the markets closed officially, the naira had gained not less than the total N12.

The naira, also appreciated on the official market on Friday, traded at 306.50 to the dollar against 306.75 exchanged on Thursday.

Although, forex dealers noted that the market opened on Friday with a cash balance of 21.28 billion naira ($69.60 million) against a deficit of about 9 billion naira last week.

This showed that the naira was boosted by increased dollar sales by the central bank to meet both corporate and individual hard currency needs via the official window, which has gained in importance since the central bank devalued the retail rate last month.

This is just as the country’s external reserves defied fluctuations in prices of crude oil in the international market and continued on the path of growth. The latest figures from the Central Bank of Nigeria (CBN) showed that the country’s external reserve was at $30.304 billion as at Thursday. At its current value, the external reserve has grown by $4.461 billion year-to-date.

The CBN had on Thursday said it had offered and received bids for $100 million from authorised dealers in the interbank market to meet the requests of genuine customers.

Consequently, forex traders expect further crash this week as the Central Bank of Nigeria (CBN) plans to inject more FOREX into the market to meet the requests of genuine customers. The CBN has so far kept to its earlier assurance to continue to supply enough forex to guarantee liquidity in the FOREX market.

The bank’s spokesman, Isaac Okorafor, gave the assurance at the weekend, noting that the CBN was committed to ensuring that the authorized dealers got sufficient supply to meet the demands of authentic customers of banks.

While disclosing that the bank had since February 2017 offered over $1 billion to the interbank market, he expressed optimism that stability had been restored to the market, with individuals now being able to easily access forex to address personal and business allowances.

A cursory view of the summary of the CBN intervention in the interbank market over the past two months, shows the highest bid rate was N360/$1, while the lowest was N315/$1.