CBN Injects $210 Mln Into Interbank, Budgetary Allocation Pushes Interest Rate Down

The Central Bank of Nigeria (CBN) sold $210 million on the interbank foreign exchange market on Tuesday just as the injection of 310 billion naira budgetary allocations to states and local governments help boost liquidity in the money market and pushed the cost of borrowing down.
In a statement, the CBN said it released $100 million for the wholesale market, $55 million for the small scale businesses and individual and $55 million for school fees, medical bills and travel expenses.
At the close of trading on the interbank market, Overnight and Open Buy Back (OBB) declined by 648 basis points and 590 basis points respectively on the back of increased liquidity in the system.
Nigeria shares revenue from crude oil export among the three tiers of government - federal, states and local- while the portion due to states and local government pass through the banking system.
At end of business on Tuesday, OBB closed at 10.17 percent while Overnight closed at 10.83 percent.
Traders said interest rate on interbank borrowing is expected to decline to single digits on Wednesday, giving the current liquidity in the market and the absence of Open Market Operations (OMO) by the CBN.
The local currency traded flat at 306.75 to the Dollar at the CBN Official Window, while the NAFEX depreciated by 0.30 naira to close at 362.42 to the dollar.
The demand for funds at the Investors’ & Exporters’ Window exceeded the supply during today's trading session.
The naira depreciated by 0.59 naira to close at 363.34 to the dollar, while transactions were executed as a high as 363.75 to the dollar at the window. On the parallel market, the naira traded flat at 363 to the dollar.