The interbank lending rate jumped to two per cent yesterday from one per cent on Monday after the Central Bank of Nigeria, CBN, directed commercial lenders to fund their naira accounts to enable them take part in its forex intervention.

Overnight lending rates jumped 100 basis points as the movement of naira cash for forex purchases drained liquidity in the market. The CBN intervenes once a week at the interbank foreign exchange market to provide dollar liquidity for some eligible importers. Last month the bank banned dollar sales to retail bureaux de change outlets, sending the naira to record lows on the black market, and later stopped daily sales to the interbank market, with the aim of conserving reserves which are down to an 11-year low.

The local currency closed at N199.40 to the dollar on the interbank market on Tuesday according to Reuters data, around the peg rate of N197 to the dollar. The naira eased to N312 on the parallel market against N310 a dollar on Monday. “The overnight rate went up today to 3 per cent in early traded but declined to … two per cent after some banks funded their forex account,” one dealer said. The interbank rate mirrors the level of naira liquidity in the banking system. Traders said commercial lenders’ credit balance with the CBN opened at N978 billion on Tuesday before the bank called for funding for forex purchases. The CBN requires commercial lenders to fund their forex account 48 hours in advance of its intervention.
https://nationalmirroronline.net/new/interbank-rate-rises-on-forex-cash-payment/