Naira fell to its weakest level in almost 10 months on the interbank market on Friday, driven down by strong demand for the dollar by oshore investors exiting the bond market and repatriating dividends, traders said.
e naira closed at 159.8 to the dollar on the interbank market, a level not seen since August 8, 2012 when it closed at 160.1 to the dollar. e naira closed at 158.98 the previous day.
“Demand for the dollar is coming from some oshore investors who are exiting the bond market and some who are repatriating dividends from investments in the equity market,” one dealer said
In another development, Nigerian interbank lending rates eased to an average of 10.25 percent on Friday, compared with the 12.31 percent average that they opened at, as the repayment of matured treasury bills by the central bank boosted liquidity.
Traders said about 206 billion naira ($1.30 billion) in matured treasury bills was repaid on ursday, raising the volume of cash in the market and pushing down cost of borrowing among lenders.
“e central bank made attempt to mop-up the excess cash with the issuance of open market operations (OMO) debt note on Friday, with little success,” one dealer said. e opened with a cash balance of about 206 billion naira on Friday, traders said.
e secured Open Buy back (OBB), fell to 10.25 percent compared with 12.25 percent on Monday and 1.8 percentage points lower than the 12 percent central bank’s benchmark interest rate.
Both overnight placement and call money also fell to 10.25 percent apiece, down from 12.25 percent and 12.5 percent at the start of the week, respectively.
Traders said cost of borrowing should inch up gradually next week as the central bank issues more OMO bills to reduce cash in the system in its bid to curb inationary growth.
“We expect to see more OMO issuance next week and with the coming bond auction on Wednesday, the volume of cash will reduce and rate will denitely rise,” another dealer said.
Debt Management Ofce (DMO) plans to sell N85 billion ($535 million) in bonds ranging between ve and 20 years at its sixth monthly debt auction of the year on June 12.