Friday 20th October, 2017
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Nigeria overnight rate drops to 20% as cash squeeze bites

Nigeria overnight rate drops to 20% as cash squeeze bites

Nigeria’s overnight lend­ing rate dropped to 20 percent on Thursday on expectation that a cash squeeze will ease after money market rates more than doubled previ­ous session.
 
The Central Bank of Nigeria CBN) has kept liquidity tight to support the currency, leav­ing its benchmark interest rate on hold at 14 percent this year. It also aims to keep rates high to attract foreign inflows into its bond market to boost dollar li­quidity.
 
“The market is a bit tight be­cause of FX purchases which mopped up (naira) liquidity,” one trader said.
 
The overnight rate closed at 44 percent on Wednesday af­ter banking system liquidity hit a debit of 265 billion naira, trad­ers said. Tight liquidity contin­ued on Thursday with the mar­ket in debit of 243 billion naira although the central bank repaid some treasury securities.
 
Traders said money market rates dropped on Thursday as lenders accessed the central bank window for naira at 16 percent.
 
Though rates could go back up if a 60 billion naira treasury secu­rity offered by the central bank on Thursday worsened the cash squeeze.
 
The central bank is selling $100 million weekly to meet wholesale currency demand and also a sep­arate amount twice weekly for re­tail needs to keep its multiple ex­change rate system stable. 

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