Interbank lending rate which is the rate at which banks lend to each other jumped to 2.9167 per cent yesterday from 1.0317 per cent on Monday after the Central Bank of Nigeria (CBN) directed commercial lenders to fund their naira accounts to enable them take part in its foreign exchange intervention on Thursday, a trader said.
Overnight lending rates jumped 100 basis points as the movement of naira cash for forex purchases drained liquidity in the market. The central bank intervenes once a week at the interbank foreign exchange market to provide dollar liquidity for some eligible importers.
Last month the bank banned dollar sales to retail bureaux de change outlets, sending the naira to record lows on the black market, and later stopped daily sales to the interbank market, with the aim of conserving reserves which are down to an 11-year low.
The naira sold at N198.95 to the dollar on the interbank market yesterday while it weakened to N312 to the dollar on the parallel market against N310 it sold on Monday.
“The overnight rate went up today to three per cent in early trade but declined to two per cent after some banks funded their foreign exchange account,” one dealer said.
Nigeria’s interbank rate mirrors the level of naira liquidity in the banking system.