Nigeria's interbank overnight lending rate jumped as high as 40 percent on Friday, well up from 18 percent last week, after the central bank drained naira liquidity from the market to support the currency after it hit a record low, traders said.
Commercial banks were also paying for purchases of foreign currency and treasury bills, traders said, thereby further reducing the amount of naira in the banking system.
The naira hit an all-time low of 331 on Friday, prompting the central bank to intervene. By midafternoon it was trading back at about 300. The currency had slipped to more than 300 to the dollar on Thursday, a month after the central bank lifted its controls on the currency.
Traders said the more liquid banks were demanding higher interbank rates to lend funds to rivals in the market. Total banking system credit tumbled to minus 700 million naira on Friday from 26 billion naira in credit on Thursday, they said.
The central bank raised 207.9 billion naira in treasury bills on Thursday, more than it had planned to issue, and at a higher yield to soak up naira liquidity and attract foreign investors back to the country.
The open secured buy-back (OBB), the rate at which banks can borrow from themselves with collateral, rose to 30 to 35 percent, one trader said.
Last week the central bank governor flew to Britain and the United States to try to lure back investors. However, some investors said the naira's 30 percent one-day fall in June was still not big enough to wipe out the need for the black market, where those who still have dollars to sell go.