Nigeria’s naira interbank lending rate closed around the 20 per cent level on Friday, a range it has traded all week because of low liquidity and the central bank’s cash withdrawal through treasury bills sales, traders said.
The central bank sold 71.6 billion naira ($227.48 million) in 195-day open market operation (OMO) treasury bills at 18 percent on Friday to reduce liquidity in the banking system in its bid to support the naira.
The local currency closed flat at 305 to the dollar on the official interbank market, but fell to a new record low of 412 to the dollar on the parallel market.
However, traders said that the expectation of the disbursal of July’s budgetary allocation to government agencies helped to calm the market.
“The market traded in anticipation of the release of the July budget allocations to states and local government, which hopefully should hit the system by Monday,” one dealer said.
Nigeria’s distributable revenues to the three tiers of government fell in July to around 494 billion naira after 559 billion naira in June as militant attacks hit oil revenues, the Finance Ministry said on Thursday.
Traders said interbank rates should trade at the 16 per cent level by next week once July’s budget allocations enter the banking system.
Nigeria, Africa’s top crude producer, distributes revenues from oil exports and taxes among its three tiers – federal, state and local – every month.
The portions for states and local governments pass through the banking system and boosts liquidity as they spend the money.
Market liquidity stood at 62 billion naira on Friday, but is expected to rise in the coming days after the budget disbursal, traders said (Source Reuters)