Nigeria’s interbank rate eased to around eight percent on Friday from 15 percent last week after the central bank repaid 152.6 billion naira ($500.57 million) in matured debt and paid refunds to banks for their forex cash provisions.
Traders said they expect a further drop in the overnight rate to around five percent in the next few days if the government, as expected, releases its May budget allocations next week to its agencies.
“We are anticipating additional cash flow from budgetary allocations to government agencies,” one currency traders said.
Nigeria, which has Africa’s biggest economy, distributes revenue from its crude exports among its three tiers of government – federal, state and local. A portion of state and local government revenues passes through the banking system.
The country’s distributable revenues rose to 462.4 billion naira in May, up from 415.7 billion naira the previous month, due to higher proceeds from corporate taxes, a government statement said late on Thursday.
Traders said about 222 billion is expected to be credited to the banking system, which would help raise the volume of cash in the money market and help push down the cost of borrowing among commercial lenders.
The central bank issued 20 billion naira of 356-day treasury bills at 18.6 percent and 383 million naira of 167-day T-bills at 18 percent on Friday to reduce liquidity and curb speculation on the local currency.
Nigeria’s money market will resume trading on Wednesday after a two-day public holiday to mark Muslim festival of Eid-al-Fitr.
