|Nigeria’s overnight lending rate fell this week to around 3 percent on Friday from an average of 3.9 percent a week ago on expectations that budget cash will be injected into the banking system on Friday or Monday, traders said.
Nigeria, an OPEC member and Africa’s biggest economy, relies on crude oil sales for two-thirds of national income. All government revenue is shared among the country’s federal, state and local governments each month.
On Thursday Nigeria distributed 387 billion naira ($1.27 billion) revenue, among the three tiers of government. A portion belonging to state and local governments is passed through the banking system.
“Interbank rates are priced at 3 percent on the expectation that the budget allocation will be credited to the system on Friday or latest by Monday,” one senior currency dealer said.
Though Nigeria raised 147.48 billion naira ($484.33 million) worth of treasury bills and 69.2 billion naira in bonds maturing in five, 10 and 20 years’ time at auctions on Wednesday, the market remains liquid enough to support the prevailing rate, traders said.
Traders said the cost of borrowing among commercial lenders should stay flat in the coming days as banking activities slow ahead of the festive season and the year-end closure of financial year.