Nigerian interbank rate rises on cash shortage

Nigeria's interbank overnight lending rate rose sharply on Friday to an average of 15 percent from 5 percent a week ago, after central bank debited commercial lenders for treasury bills purchases.
Nigeria sold a total of 190 billion naira ($670 million) in treasury bills on Friday with maturities ranging from three months to one year, with yields broadly flat.
Market liquidity had opened at 167.26 billion naira on Friday, but the money market went into repo after the central bank sold treasury bills which significantly reduced level of cash in the banking system, pushing up cost of borrowing among banks.
"The market was trading around 10 percent for overnight placement prior to the sale of treasury bills, but rose sharply to an average of 15 percent shortly after the result of the auction was announced," one dealer said.
Nigeria's financial market was closed for trading from Tuesday to Thursday for a public holiday.
Traders said interest rate should open next week around same level of 15 percent but could ease a little with the expectations of injection of about 73 billion naira in matured treasury bills and payment of debt to government contractors.