The overnight naira interbank lending rate rose sharply to an average of 40 per cent on Friday, up from 15 per cent last Friday after the Central Bank of Nigeria debited bank accounts for Treasury bills and bonds purchases.
Dealers said the large cash withdrawal to settle debt purchases led to some commercial banks scrambling for naira cash to meet their immediate obligations, pushing up the cost of borrowing among banks, Reuters reported.
The Federal Government raised N121bn in an auction of local-currency bonds and N183bn in short-dated Treasury bills on Wednesday in a separate auction, while payments for the debt issues were due on Thursday and Friday, draining liquidity in the banking system.
Market liquidity was N128bn in deficit on Friday after the CBN withdrawals, while the money market went into repo due to the naira cash shortage.
“We see rates trading within the same range in the early part of next week, but they could fall later in the week due to anticipated repayment of matured Treasury bills on Thursday,” one dealer said.
The Federal Government has estimated it will borrow around N900bn from the local debt market this year to fund a budget deficit projected at N2.2tn.
The CBN has said it is planning to borrow N1.77bn via Treasury bills in the last three months of the year.
In its fourth quarter Treasury bill issue programme released last Monday, the CBN said it would raise about N815.37bn, comprising 91 days, 182 days and 364 days debt instruments.