The overnight lending rate rose sharply to around 50 per cent on Friday, from an average of 4.5 per cent on Thursday, after the Central Bank of Nigeria debited commercial banks’ accounts for special foreign exchange sales.
The CBN had on Monday asked banks to submit bids for a “special currency auction” to clear the backlog of matured outstanding dollar obligations for selected sectors of the economy, which include airlines, fuel importers and manufacturing firms.
Forex traders said the central bank sold “funded forwards of two to five months tenor” dollars to the targeted sectors at an auction this week and required them to pay for the dollar sale on Friday.
The CBN is yet to disclose the amount sold but currency traders said the cost of borrowing among banks climbed because of a scramble for funds among commercial lenders to pay for the forex purchases, Reutersreported.
The country is in its first recession in 25 years, caused by low global oil prices, which have cut the supply of dollars needed to fund imports.
Attacks by militants on pipelines in the Niger Delta since January have cut crude output, reducing dollars earned.
The dollar shortage in the country has caused many companies to halt operations and lay off workers, compounding the economic crisis.
The naira has traded at around 305.5 naira to the dollar on the official interbank market since August, while it was quoted at 495 to the dollar on the parallel market on Friday.
The financial market is closed until Wednesday due to public holidays over the Christmas period.