LAGOS, Sept 2 Nigeria's overnight naira
interbank lending rate eased to around 16 percent on Friday,
down from about 20 percent last week on improved naira cash
liquidity after the disbursal of July budgetary allocations to
Nigeria's distributes revenues from crude exports and taxes
among its three tiers of government - federal, state and local -
monthly. About 250 billion naira ($751 million) belonging to
states and local government from July budget hit the banking
system this week, providing liquidity.
Total bank surplus cash with the central bank stood at 118
billion naira on Friday, better than the 62 billion naira at the
close of last week.
At its rate-setting MPC meeting in July, the bank raised
its benchmark interest rate to 14 percent in a bid to tighten
However, the naira has been under pressure due to increased
liquidity in the banking system because of the monthly budget
The naira closed flat at 305 to the dollar on the interbank
market on Friday, but fell to 425 a dollar on the black market
from 420 a dollar previously.
"The market liquidity was sufficient to support transactions
this week, the reason we have the rates at par with the central
bank's standing lending facility rate of 16 percent," one dealer
Traders said the central bank attempt to reduce the level of
liquidity through the selling of treasury bills was not enough
to because of repayment of about 212 billion naira in matured
treasury bills on Thursday.
"We expect rate to ease bellow the 16 percent level next
week unless central bank sell more treasury bills to reduce cash
in the system," another dealer said.
($1 = 332.50 naira)
(Reporting by Oludare Mayowa; Editing by Alison Williams)