For the third consecutive day on Thursday, Nigeria’s interbank money market halted trading amid a continued decline in liquidity in the banking system after new government directives triggered huge cash outflows.
“We only have indicative quotes of about 20-30 percent in the market for overnight lending, but no bank was willing to do any deal even at that rate yet,” one dealer said.
Dealers said system liquidity has continued to drop as more banks move money to the central bank to comply with a directive to transfer government revenues to a single account, while banks also had to provide funding for advance payment for their forex purchases.
Cash balances held with the central bank by commercial lenders stood at N173 billion credit on Thursday, down from about N366 billion on Wednesday. The balance stood at N486 billion on Tuesday.
President Muhammadu Buhari has ordered that all revenues be paid into the “Treasury Single Account” (TSA) from Tuesday, as part of a drive to fight corruption and aid transparency.
The policy caused panic among commercial lenders at the expiry of the deadline on Tuesday, with trading halted on the interbank money market on fear the move could cripple their operations.
Traders said rate moderated from the initial 100-200 percent indicative rate quoted on Tuesday to 15-20 percent because some banks resorted to borrowing fund at the central bank discount window at 15 percent, using their treasury bill holdings as collateral.
“The indicative rates have been kept at a level below 20 percent since yesterday (Wednesday) because of the opening up of the central bank discount window at 15 percent for those who have treasury bills backing to borrow,” another trader said.