The nation’s overnight interbank rate rose to an average of four per cent on Friday, up from three per cent the previous week, as the Central Bank of Nigeria’s attempt to mop up excess liquidity from the banking system faltered.
Traders said the CBN failed to sell Treasury bills at its Open Market Operation window twice last week because commercial banks were asking for higher returns than the bank was willing to offer.
The CBN, however, sold 206-day bills worth N93.18bn ($468.24m) on Monday, and retired N129.61bn of matured OMO bills, leaving the system with more cash, Reuters reported.
Total banking system liquidity stood at N401.72bn on Thursday, slightly lower than N408.25bn the previous week, dealers said.
“We expect rates to trade lower next (this) week if the promise of the government to release capital project funding next (this) week is anything to go by,” one dealer said.
Meanwhile, the naira is expected to drop further against the United States dollar at the parallel market this week as the CBN moves to release details of its new flexible exchange rate policy.
The local currency was quoted at 368 to the dollar on the black market on Friday, compared with 350 last week.
The naira closed at 197.50 a dollar on the official interbank market, around the peg rate of 197.
The Group Managing Director, United Bank for Africa, Philips Oduoza, had said on Thursday that details of the proposed flexible currency model would be ready in a “short while”, after a Bankers Committee’s meeting in Abuja.
The announcement halted the free fall of the naira, while many traders expected that the announcement of the detail would spur the alignment of the parallel market rate and the official window, according to Reuters.
Major African currencies are also expected to come under pressure this week due to low foreign exchange supplies and lingering concerns about global economic growth.
Source:© Copyright Punch Online