Naira gains further as inter-bank rate hits 29.5%
The Nigerian currency, the Naira, over the weekend closed at an appreciable rate of 386 to a dollar, stronger than 388 traded in the previous day at the parallel market. Although, the overnight interbank lending rate rose sharply to 29.5 percent on Friday, up from 19 percent last week.
However, this was after the Central Bank of Nigeria (CBN) sold treasury bills to soak up liquidity from the banking system in a bid to curb pressure on the naira.
To this end, the local currency began its gaining streak at the mid-week strengthening against the Dollar, Pound and the Euro at the parallel market, and consolidated its appreciation on Friday as it ended the week on a positive note.
The apex bank during the week under review injected more foreign exchange through intervention segments of the market, helping the nation’s currency to gain against all the tree major foreign currency.
The naira, however, steady at 494 and 420 against the Pound Sterling and the Euro from the previous rate of N495 and N422 traded at the unofficial market, respectively.
Trading at the interbank market showed that the Naira closed at N305.6 a better closing rate than 305.7 exchanged on Thursday, while the Pound Sterling and the Euro closed at N453.18 and N386.28.
At the Bureau De Change (BDC) window, the Naira was sold at N362 to the Dollar, while the Pound Sterling and the Euro closed at N495 and N423.
The Nigerian currency, also, recorded a slight gain at the Investor and Export window, closing at appreciable rate of 382.44 better than the opening price of 383 and an improved rate compare to 383.23 per dollar exchanged on Thursday and 400 to a dollar during the week under review.
Foreign exchange traders said the central bank sold about N17 billion ($55.81 million) worth of open market operations (OMO) paper on Friday and also soaked up about N110 billion in bonds settlement.
“The interbank rate ranged between 20-50 percent intraday because of the huge amount of liquidity soaked out of the market by the central bank today, but the rate eventually closed at around 29.5 percent for the overnight,” one trader said.
Nigeria has stepped up the frequency of treasury bill sales recently to soak up excess liquidity in a move to curb pressure on the local currency, leaving the market dry and banks scrambling for cash to cover their positions at higher borrowing cost.
Traders said the central bank repaid about 87 billion naira in matured OMO bills on Thursday but this was less than the volume of cash outflow for treasury bills, bonds and forex purchases.
“The money market is expected to remain illiquid in the coming days while we see rates climbing further as the central bank continue to mop-up liquidity from the market,” another trader said.
