Interbank Rate Drops After Liquidity Rise


The central bank injected around N234bn ($1.2bn) in matured open market operations bills on Thursday and additional refunds on cash deposited by commercial lenders for foreign exchange purchases by Friday, increasing the liquidity in the banking system.

Reuters reported that the cost of borrowing between banks had climbed to three per cent on Wednesday after the CBN directed commercial lenders to fund their naira accounts to enable them to take part in its forex intervention on Thursday.

The central bank intervenes once a week in the interbank foreign exchange market to provide dollar liquidity for some eligible importers.

The total commercial lenders’ credit balance with the central bank is seen at around N700bn on Friday because of refunds from the surplus cash deposited for forex purchases, compared with N314bn last week.

The secured Open Buy Back rate fell to 0.50 per cent from one per cent last week.

The interbank rate reflects the level of naira cash liquidity in the banking system.

“Interbank rates are seen oscillate between one per cent and 3.5 per cent next week on provisions for foreign exchange purchase and possible issuance of OMO bills by the central bank during the week,” one dealer said.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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