Interbank lending rate drops to 20% amid cash squeeze


’Femi Asu with agency report

The nation’s overnight lending rate dropped to 20 per cent on Thursday on expectation that a cash squeeze will ease after money market rates more than doubled previous session.

The Central Bank of Nigeria has kept liquidity tight to support the currency, leaving its benchmark interest rate on hold at 14 per cent this year.

The CBN also aims to keep rates high to attract foreign inflows into its bond market to boost dollar liquidity.

“The market is a bit tight because of FX purchases which mopped up (naira) liquidity,” one trader was quoted by Reuters as saying.

The overnight rate closed at 44 per cent on Wednesday after banking system liquidity hit a debit of N265bn, traders said.

Tight liquidity continued on Thursday with the market in debit of N243bn, although the central bank repaid some treasury securities.

Traders said money market rates…

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