Naira up 5.25% after CBN dollar sale; Interbank rate soars

Dollar to Naira

LAGOS Aug 19 (FxMallam) – The Nigerian naira ended the week on a winning note closing 5.2 percent higher at 308 per dollar on Friday after the Central Bank of Nigeria (CBN) sold dollars to aid the embattled currency according to currency traders.

Since the end of the currency peg, CBN has been selling dollars almost daily to boost liquidity and support the naira.

The Nigerian naira, which hit an all-time low of 365.25 on Thursday, closed at 324 per dollar in the previous trading session.

In other news, the naira interbank lending rate remained sky high on Friday, increasing from 6.26 percent since mid week as CBN took steps in the debt and currency markets to try to boost the local currency.

CBN sold about 236 billion naira ($776 million) of open market operations (OMO) treasury bills on Thursday, sending the banking system into a deficit of close to N39 billion on Friday.

“Liquidity has been tight because of the successful mopping up exercise by the central bank, which sent the market into repo” one dealer commented speaking to Reuters News.

The move by CBN sent the overnight interbank rate soaring to 25 percent on Friday, having touched 22 percent on Thursday.

Traders also said that CBN also debited commercial lenders accounts for the purchases of bonds and primary market treasury bills auctioned Wednesday, which in turn added to the shortage of naira in the market.

Nigeria distributes revenue from crude exports every month among its 36 states, and local and federal administrations.

Traders indicated that interbank rates would likely ease by next week when part of July’s budget allocation enters the banking system.