Overnight lending rate fell to record low 2 percent on Wednesday, as the Central Bank of Nigeria, CBN, refunded excess withdrawals from lenders before it loosened monetary policy last month to spur credit growth, traders said.
The regulator has been injecting cash into the banking system in a bid to ease liquidity and stave off recession in Africa’s biggest economy, which has suffered as oil prices fell.
It cut cash reserve requirements for lenders to 25 percent from 31 percent two weeks ago and left interest rates on hold at 13 percent. Liquidity had dried up as authorities ordered banks to move government deposits into a single account at the central bank, part of an anti-graft drive.
“We expect rates to remain low until the CBN issues new bills,” one dealer said.
The overnight lending rate has hovered around a three-month low of 3 percent since last week after the central bank repaid matured open market bills and did not issue fresh ones to mop up funds, in a bid to keep borrowing costs low.
Banking system credit opened at N355 billion ($1.79 billion) before the inflow hit the system, lifting the sector’s total cash balance with the central bank to N1.1 trillion, traders said.
Before this, lenders in Africa’s most populous nation had lowered their loan growth guidance for this year, citing rising regulatory and economic uncertainty and a weaker output growth.
Economic growth dropped to 2.35 percent in the second quarter from 6.54 percent a year earlier.

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