By Babajide Komolafe
LAGOS—The huge dollar sales by the Central Bank of Nigeria, CBN, yesterday, caused intense scarcity of funds in the interbank money market, which prompted cost of funds to rise sharply to 200 per cent.
From last Friday to Tuesday this week, the CBN had sold over $800 million in both spot and forward transactions.
According to a money market source, who spoke on condition of anonymity, most of the banks have spent heavily in order to participate in the dollar sales.
Investigation also revealed that the CBN also sometimes sell dollars to the banks even when they do not indicate interest to buy dollars.
“The CBN just debit their accounts and give them the dollars,” said the source, adding that as a result, many banks have negative liquidity position, resulting into intense demand for funds in the interbank money market.
Reflecting the acute scarcity of funds in the market, interest rate on overnight borrowing which closed 15.25 per cent last Friday, jumped to 22.75 per cent on Monday, 145.25 per cent on Tuesday and 200 per cent at the close of business, yesterday.
Similarly, interest rate on collateralised borrowing (Open Buy Back, OBB), which closed 14.67 per cent last Friday, jumped to 21.67 per cent on Monday, to 140.83 per cent on Tuesday, and to 196 per cent yesterday.
CBN sells $100m
Meanwhile, the CBN continued its intervention in the foreign exchange market, yesterday, selling $100 million in the spot market.
Consequently, the CBN, since Monday, February 20, 2017, when it announced new measures to boost dollar supply and forestall the declining fortunes of the naira in the parallel market, has injected $3.2 billion by intervening in the forex market 17 times as follows:
Tuesday, February 21, $417 million; Thursday, February 23, $231 million; Monday, February 27, $180 million; Friday, March 3, $350 million; Monday, March 6, N367 million; Tuesday, March 7, $100 million; Thursday, March 9, $170 million; Tuesday, March 14, $190 million; Wednesday, March 14, $150 million; Thursday, March 16, $100 million, Monday, March 20, $143 million; Thursday, March 23, $100 million; Monday, March 27, $185 million; Thursday, March 30, $100 million; Monday, April 3, N240 million; Thursday, April 6, N100 million; and Monday, April 10, $100,000.