Nigeria’s overnight lending rates and long term bonds yields rose on Wednesday as commercial banks put money aside in preparation for currency purchases. The Central Bank will debit their accounts for currency purchases made on behalf of their customers squeezing out the excess liquidity that helped drove down rates few days earlier.
According to Reuters, yield on the 20-year bond rose to 13.8 percent, up 29 basis points from its previous close, while the benchmark 10-year paper edged up 23 basis point to 13.35 percent as liquidity thinned out.
Banking system liquidity opened lower at N385 billion on Wednesday, lifting up overnight lending rates to 5.5 percent from 1 percent the previous day, traders said. Overnight rates have stayed as low as 0.5 percent in the past week.
Liquidity topped 1 trillion naira last week as the bank injected cash through repayment for matured open market (OMO) bills and refunds due to lenders after it reduced cash reserves requirements.
Traders expect additional OMO maturities of around 200 billion naira to hit the system in two weeks, coupled with government revenue disbursals of another 200 billion naira due month-end.