Nigerian interbank lending rate closed at an average of 16.87 percent on Thursday, down from 59.58 percent average on Wednesday due to repayment of huge matured treasury bill to investors by the regulatory bank, traders said.
The Open Buy Back (OBB) closed at 16.5 percent while the overnight rate deep to 17.25 percent at the close of business on Thursday.
The market had closed with the OBB and O/N rates at 56.67 percent and 62.50 percent respectively, on Wednesday.
Interbank rate represents the cost of borrowing among Nigerian commercial lenders and reflects the states of liquidity in the banking system.
The Central Bank of Nigeria (CBN) has sustained liquidity mop-up since last week to curb pressure on the local currency and support the naira after the country's currency slipped at the parallel market last week. The naira had depreciated to 370 to the dollar on the parallel market last week from 360 a dollar it has stabilised for more than a year.
The CBN sold around 296 billion naira worth of Open Market Operations (OMO billion on Thursday to further reduce liquidity in the system.
However, about 551 billion naira repayment made on matured treasure bills countered the effect of the liquidity mop-up on the market rate.
Traders said barring any sales of OMO by the CBN on Friday, rates could close flat as there is no significant funding activity expected in the market.
The CBN regularly issue short-dated treasury bills to mop-up percieved excess liquidity from the banking system when it becomes obvious the country's currency is facing pressure from speculations.
The naira closed firmer at 364 to the dollar on the parallel market compared with 365 per dollar it closed the previous day.
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