Following an injection of naira liquidity into the banking system, Nigeria’s overnight lending rate dropped sharply to an average of 3.9 percent on Friday from 10 percent a week ago.
A total of 454 billion naira ($1.49 billion) in debt refund to state governments and matured treasury bills entered the system this week, raising liquidity and pushing down borrowing cost among lenders.
Traders said the central bank sold around 115.68 billion naira worth of open market operations treasury bills between Wednesday and Thursday, but the market remained sufficiently liquid to keep rates at below double digits.
This week the central bank paid owed monies to state governments, which improved liquidity as did 49 billion naira distributed from Nigeria’s oil savings excess crude account.
Lending rates could trade flat next week, traders said, as firms and banks close activities for the end of the year.