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.