Nigerian interbank lending rate spiked 7.75 percentage points on Wednesday to 18 percent for overnight placement ahead of the central bank’s withdrawal of around 750 billion naira ($5 bln) to enforce a new cash reserves rules on public sector deposits.

Nigeria’s central bank two weeks ago raised cash reserve requirements for banks to hold government sector deposits to 75 percent, from 50 percent, in a bid to tighten liquidity and support the weakening naira currency.

Fund providers were quoting higher rates on short tenor placements on Wednesday, dealers said as they were expecting the central bank to tighten liquidity before the close of market.

Overnight placement was 10.25 percent the previous day.

“Rates have suddenly jumped because of the signal … to debit banks’ accounts, though the money is yet to be debited,” one dealer said. ($1 = 162.7 naira)

Source: Reuters (by Oludare Mayowa)