{"id":8017,"date":"2013-08-09T09:39:55","date_gmt":"2013-08-09T09:39:55","guid":{"rendered":"http:\/\/disnaija.com\/nigerian-newspapers\/cbn-removes-n1trn-from-banking-system\/"},"modified":"2013-08-09T09:39:55","modified_gmt":"2013-08-09T09:39:55","slug":"cbn-removes-n1trn-from-banking-system","status":"publish","type":"post","link":"https:\/\/disnaija.com\/cbn-removes-n1trn-from-banking-system\/","title":{"rendered":"CBN removes N1trn from banking system"},"content":{"rendered":"
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The Central Bank of Nigeria has removed an estimated Ntrn ($ 6.27bn) from the banking system on Wednesday, causing interbank lending rates to spike by seven percentage points from Tuesday\u2019s close, but failing to lift the naira.<\/p>\n

Interbank lending rates rose to around 19 per cent on Wednesday, up from around 12 per cent at Tuesday\u2019s close, after the CBN debited lenders accounts to meet a hike in the Cash Reserve Ratio on public sector deposits to 50 per cent, from 12 per cent previously. The bank said it would impose the requirement two weeks ago to tighten liquidity and support the naira.<\/p>\n

But the naira fell slightly against the dollar, closing at N160.10 to the dollar on the interbank market, weaker than the N159.65 to the dollar it closed at on the previous day.<\/p>\n

Dealers said this was because banks had already sold their dollar positions to meet the new requirement ahead of Wednesday, so the impact had already been priced in. \u201cThe CBN finally debited our accounts, draining the market of liquidity and the overnight rate went up to 19 per cent,\u201d one dealer said.<\/p>\n

Traders said many lenders had already sold down liquid assets and dollars to replenish their cash balances in preparation for the withdrawal.<\/p>\n

\u201cThe market had priced the effect of the huge cash withdrawal since the announcement two weeks ago, while fresh dollar demand and lack of dollar flows are expected to push down the value of the naira next week,\u201d another dealer said.<\/p>\n

Analysts said Nigeria will need to attract back foreign inflows for the central bank\u2019s move to have a sustained positive effect on the naira.<\/p>\n

The country is a growing destination for foreign investors, but it remains vulnerable to capital flight. Efforts to defend the naira helped shrink foreign reserves to $ 46.96bn by end-July, from $ 48bn in June.<\/p>\n

On the bi-weekly foreign exchange auction, the central bank sold $ 248.4m at N155.75 to the dollar, compared with $ 285m sold at the same rate on Monday.<\/p>\n

The bank has spent billions of dollars of foreign reserves over the past two months on keeping the naira within its target corridor of plus or minus three per cent around N155 to the dollar.<\/p>\n

The secured Open Buy back (OBB) rose to 18 per cent from 11.5 per cent on Friday, six percentage point higher than the central bank\u2019s benchmark interest rate.<\/p>\n

Overnight placement edged higher at 19 per cent from 11.5 per cent, while call money closed at 20 per cent, eight percentage points higher than the 12 per cent it closed on Friday.<\/p>\n

Dealers expect interbank rates to rise further early next week after the market reopens from a 2-day Muslim holiday but should moderate toward the end of the week on the back of additional cash flows from matured treasury bills.<\/p>\n

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Posted in Nigerian Newspapers. <\/a>A DisNaija.Com<\/a> network.<\/p>\n

Source: National Mirror Newspaper<\/p>\n

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