Lending rate drops on fresh naira injection – punch

Lending rate drops on fresh naira injection – punch

The country’s overnight lending rate dropped to 12 per cent on Friday after spiking to almost 100 per cent on Wednesday due to a liquidity squeeze as lenders paid for hard currency and treasury bills purchased from the Central Bank of Nigeria.

Reuters reports that money  market rates had moderated on Thursday after the Federal Government disbursed N224.54bn ($715.10m) in budget allocations to the three tiers of government, boosting liquidity, Reuters reported.

The CBN also repaid around N95.7bn in matured treasury bills, to boost liquidity, traders said.

Subsequently the central bank sold around N26.90bn at an open market treasury auction on Friday to soak up naira liquidity. Traders said the money market remained liquid despite the auction.

One trader expected rates to rise up to 30 per cent next week as the central bank issues more securities to mop up part of government disbursement from the banking system.

Meanwhile, the Nigerian naira is seen appreciating marginally both on the investors’ foreign exchange window and on the black market as dollar liquidity rises on the back of offshore inflows.

The naira gained to 364 to the dollar on the black market on Friday compared with 365 last week. It was quoted at 366.79 per dollar for investors. On the official market window it traded at around 305.90 against the dollar.

The CBN has been injecting the US currency into the market even as dollar liquidity swells with rising investor interest in Nigerian assets.

Meanwhile, Ghana’s cedi could lose ground next week, undercut by increasing corporate dollar demand unless the central bank scales up its weekly sales to support offshore inflows, an analyst said.

The local unit was trading at 4.43 to the dollar by midday on Friday, weaker than 4.38 a week ago.

“Corporate demand has firmed this week without matching inflows and we expect this trend to continue into next week unless the central bank comes in robustly,” an Accra-based currency analyst Chris Fiagbe said

The kwacha is expected to firm, supported by hard currency inflows from companies preparing to pay mid-month taxes and due to rising copper prices.

Commercial banks quoted the currency of Africa’s number two copper producer at 8.9000 per dollar from a close of 9.1600 a week ago.

“The local unit is expected to be buoyant in the interim on the back of decent hard currency supply on the market and bullish copper prices,” BancABC, the Zambian branch of Atlas Mara said in a note.

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