Nigeria interbank rate sinks as budget cash disbursal awaited

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LAGOS Feb 24  – Nigeria’s overnight lending rate plummeted to around 15 percent on the interbank market on Friday from around 133 percent the previous day, as the market anticipated the injection of budgetary allocations to government agencies.

Africa’s top crude producer distributes oil revenues among its three tiers of government and a portion belonging to states and local government passes through the banking system.

The interbank rate spiked to around 200 percent on average this week as commercial lenders provided funds for several currency sales via interventions from the central bank, which drove up the cost of borrowing among banks.

The central bank auctioned $230 million in forward contracts on the official market on Thursday after selling $370 million earlier in the week in a bid to narrow the gap between the official and black market dollar rate.

The money market opened with a cash deficit of about 45.64 billion naira ($149.39 million) on Friday against a 83.89 billion naira surplus last week.

“The market traded initially around 100 percent but slowed to between 10-15 percent as traders anticipate a possible disbursement of budget allocations,” one trader said.

Traders expect the interbank lending rate to open below double digits next week once the budget cash is disbursed.

 

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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