Banks run out of naira to buy dollars as overnight interbank rate spikes to 300%  

The Nigerian interbank market offer rate spiked to 300 percent just before banks went on Easter break, as  the Central Bank’s Open Market Operations (OMO) and foreign exchange sales drained naira liquidity and pushed up the cost of money.

Traders said that the inter bank plunged into a naira deficit of N160 billion, forcing some banks to even approach the Central Bank window for cash.

Owing to the naira shortage, the interbank overnight lending rate- which is the rate at which commercial banks lend to one another, ballooned by 100 percentage points, to 300 percent on Thursday, from 200 percent on Wednesday.

Traders said banks scrambled to raise enough naira to buy up a N134 billion government bond on Thursday but could only come up with N105.64 billion, N29 billion less than the government wanted.

Gains from investment in government securities, with interest rates anywhere around 18 percent, have seen banks raise holdings of government debt in recent months. Monetary authorities opted to leave benchmark lending rates at a record high of 14 percent, to attract portfolio investors and stabilise inflation.

 

LOLADE AKINMURELE