After several weeks of sliding, the Nigeria’s currency, Naira on Friday strengthened against the US dollar in the parallel market.
The currency firmed up to N360 from N375 to one dollar on Thursday, thus easing off the pressure on the nation’s currency.
Nigeria’s overnight inter-bank lending rate dropped to an average of one per cent on Friday from around 4.5 per cent on Thursday as the market anticipated refunds of cash deposited by commercial lenders for foreign exchange purchases.
According to traders, liquidity dropped sharply and the cost of
borrowing climbed after commercial lenders moved cash to their naira
accounts with the Apex bank (CBN), to enable them take part in the
weekly forex intervention on Thursday.
On Tuesday, Feb. 16, banks deposited about N700 billion to
back their planned forex purchases, thus draining liquidity in the banking system and pushing the lending rate above 4 per cent.
“The cost of funds dropped today (Friday) based on expectation that the CBN will refund a portion of cash deposited for forex intervention before the close of business,” one dealer said.
Once in a week, the Central Bank of Nigeria (CBN) usually intervenes in the official inter-bank foreign exchange market to provide dollars for eligible importers.
It requires commercial lenders to fund their Naira account, 48
hours ahead of the intervention.
Traders said that they were expecting around N450 billion-N500 billion in refunds from the CBN, raising the level of cash
credits in favour of commercial lenders and helping to hold down
Meanwhile, President Muhammadu Buhari, has rejected calls to devalue the Naira, stressing that he would not “kill the naira”.