CRR: Interbank rates rise to 19 per cent as CBN withdraws N1trn from banking system
The Central Bank Of Nigeria (CBN) removed an estimated N1 trillion from the banking system on Wednesday in line with its new Cash Reserve Requirement on public sector deposits.
This action had an immediate effect on the interbank lending rates.
It pushed up interbank rates by 7 percentage points from Tuesday's close, sending it up to 19 per cent.
The bank rates stood at around 12 per cent at Tuesday's close.
However, this drain in liquidity did not have immeddate effects on the naira as it fell slightly against the dollar, closing at N160.10 to the dollar on the interbank market on Wednesday.
It had closed at N159.65 to the dollar on the previous day.
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, adding that banks had already sold down liquid assets and dollars to replenish their cash balances in preparation for the withdrawal.
'The central bank finally debited our accounts today, draining the market of liquidity and the overnight rate went up to 19 per cent. The 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,' one dealer said.