Nigerian overnight rate rises as central bank mops up liquidity

Nigerian interbank lending rates climbed 2 percentage points to an average of 10.75 percent this week from 8.75 percent last week, after the central bank moved to support the ailing local currency by draining excess cash from the market.
Traders said the cost of funds has steadily risen as the central bank sold Open Market Operation (OMO) bills this week. That reduced liquidity and helped to shore up the naira, which closed at a record low of 190.60 to the dollar on Friday.
Maturing treasury bills repaid about 144 billion naira on Thursday, but the OMO sales offset that, one dealer said.
Traders said the central bank sold 260 billion and 120 billion naira worth of OMO bills on Thursday and Friday, pushing interbank lending rates higher.
Cash balances in lender accounts with the central bank stood at 344 billion naira on Friday, compared with 377 billion naira last week.
The secured Open Buy Back traded at 10.5 percent on Friday. That was up from 8.5 percent last week but 2.5 percentage points below the central bank's benchmark rate of 13 percent.
Overnight placement rose to 11 percent from 9 percent last week, traders said.
Traders said the cost of borrowing should be stable next week if the central bank drains less cash, allowing the cash flow from matured bills to reach the market.
Nigeria kept its benchmark interest rate at 13 percent for the second consecutive time at a Monetary Policy Committee meeting this week.