Nigerian overnight rate spikes, naira stabilises as central bank curbs liquidity

 

Nigeria's overnight lending rate spiked to 30 percent on Friday while the naira stabilized, after the central bank drained liquidity from the banking system as part of efforts to support the currency, hit by falling global oil prices.

The central bank withdrew around 300 billion naira ($1.7 bln) from the system this week to reinforce monetary tightening introduced last week, pushing the interbank overnight lending rate up to 30 percent, from 12 percent a week ago, dealers said.

The central bank is struggling to prop up the naira, which has taken a beating over the past few months as falling oil prices have shaken confidence in the assets of Africa's leading energy producer.

As the bank has been forced to tighten monetary policy to defend the currency, it also risks hurting Africa's biggest economy as high interbank rates will constrain credit growth and could create bad loan problems for lenders.