Naira strengthens, trades N360-367 on the black market
Nigeria’s naira has finally strengthened against the US dollar after weeks of free fall on the parallel market.
On Friday, February 19, the currency gained N360 against the American dollar what means that the pressure on the national currency has eased.
Reuters reports that Nigeria’s overnight interbank lending rate dropped to an average of 1% on Friday from around 4.5% 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 central bank to enable them to take part in the weekly forex intervention on Thursday.
On Tuesday, February 16, banks deposited about 700 billion naira to back their planned forex purchases, draining liquidity in the banking system and pushing the lending rate above 4%.
“The cost of funds dropped today (Friday) based on expectation that the central bank 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 usually intervenes in the official interbank foreign exchange market to provide dollars for eligible importers.
It requires commercial lenders to fund its naira account 48 hours ahead of the intervention.
Traders said that they were expecting around 450 billion-500 billion naira in refunds from the central bank, raising the level of cash credits in favour of commercial lenders and helping to hold down interbank lending.
Meanwhile, President Muhammadu Buhari has rejected calls to devalue the currency of Nigeria, stressing that he would not kill the naira