The rates at which banks lend to each other, called inter-bank rates, on Wednesday rose by 12.68 percent to 58.29 percent from 51.75 percent the previous day, while naira gained 55 kobo or 0.31 percent at the inter-bank market following the devaluation of naira on Tuesday by the Monetary Policy Committee (MPC).
The apex bank on Tuesday lifted its benchmark interest rate by 100 basis points to a record 13 percent and increased the midpoint target for the currency to N168 per dollar, from N155, while widening its trading band to 5 percent from 3 percent. The naira was last devalued in November 2011.
Consequently, after trading on Wednesday, the local currency closed at N176.80/$ as against N177.35/$ the previous day, according to data obtained from the Financial Markets Dealers Quotations (FMDQ).
At the money market segment, the Nigerian Inter-Bank Offered Rates (NIBOR) rate for overnight tenor climbed to 14.29 percent compared to 9.50 percent the previous day. Similarly, 1 month, 3 months and 6 months rose to 14.03 percent, 14.58 percent and 15.38 percent from 13.44 percent, 13.98 percent and 14.81 percent, respectively, the previous day.
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The CBN sold $667 million at its twice-weekly forex auction at N166.65 to the dollar, to meet back-log dollar demand, helping the local currency recover on the inter-bank market after it devalued the naira the previous day, dealers told Reuters.
The apex bank had initially offered to sell $200 million, less than a third of what it ended up trading as it normally sells between $200 million and $400 million.
At its last auction on Monday, before the devaluation, the bank sold around $300 million at N158.41 to the dollar.
“The market will respond gradually to the measures until stability returns in the range of N175 to a dollar,” Pabina Yinkere, head of research at Lagos-based Vetiva Capital Management Limited., told Bloomberg by phone. “The measures will reduce speculation and boost the naira.”
