The overnight rate closed at 1.5 percent on Friday, from 5 percent the previous day after the central bank drained naira liquidity when it sold Treasury bills. The rate had initially spiked to 7 percent, its highest since October.
Nigeria sold 85.83 billion naira in naira-denominated bonds maturing in 2020 and 2026 in Wednesday's auction with payment due on Friday.
The central bank usually asks commercial lenders to pay for their dollar purchases 48 hours in advance, but refunds a portion of the deposit to them after forex intervention.
"We anticipate a further drop in the cost of borrowing in the interbank market to around 1 percent early next week as the liquidity level reflects the refund from the surplus from cash deposited for forex purchases," one dealer said.
Nigeria's interbank rate mirrors the level of naira cash liquidity in the banking system.
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