Overnight Rate falls, CBN Mops Cash to Boost FX Reforms

Interbank overnight rate fell 250 basis points to 1.5 percent on Friday from a week ago, driven by excess liquidity, prompting the central bank to mop up the naira at higher rates to support its new currency regime.

Banking system credit opened at 1.06 trillion naira ($5.3 bln) on Friday, compared with 401.72 billion naira last week, traders said.

The excess liquidity prompted the central bank to sell 205.9 billion naira ($1.03 billion) worth of one-year bills on Friday at 13.5 percent, compared with the secondary market rate of 10.81 percent, traders said. The bank had offered 78 billion naira in bills on Thursday.

The central bank has said it would start a new foreign exchange trading regime on Monday, abandoning its 16-month peg and setting the stage for the naira to fall sharply.

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