Forex reserves fall, interbank lending rate rises

Nigeria’s foreign exchange reserves declined by 2.62% month-on-month to $37.14bn by May 27, from $38.14bn recorded in April.

This was contained in the latest data from the Central Bank of Nigeria (CBN) website on Friday.

A year ago, the forex reserves of Africa’s biggest economy was $48.41bn. This shows a $11.27bn drop which is a 23.28% decrease.

Also, Nigerian interbank lending rates rose this week to an average of 10.75% from 10.25% last week.

The central bank embarked on mopped up liquidity to curb inflation and speculation in the local currency consistently issuing Open Market Operation (OMO) debt notes this week to soak liquidity from the banking system.

Traders said the bank issued about N170bn ($1.05bn) worth of OMO treasury bills to absorb excess cash in the banking system, driving up interest rates among banks.

The cash balance that lenders hold at the central bank fell to N348bn on Friday compared with N411bn last week.

The open buy-back (OBB) inched up to 10.50% from 10.25% last week, 1.5 percentage points below the central bank’s benchmark rate of 12%.

Overnight placement also rose to 10.75% against 10.25% last week while call money increased to 11% from 10.25% previously.

Nigeria plans to issue N137.97bn worth of treasury bills on June 4 at maturities ranging from three months to one year, the central bank said on Wednesday.

This is expected to further deplete cash in the banking system and push up of cost of lending among banks.