Nigeria 3-yr bond yield, naira up on liquidity shortage
LAGOS (Reuters) – Nigeria‘s naira currency and the yield on its most liquid 3-year bond both surged on Wednesday, after state-owned energy firm NNPC sold $450 million to some lenders amid a central bank squeeze on liquidity.
The naira was up more than 1 percent to a 2-week high on the interbank market on Thursday, trading at 158.35 naira to the dollar at 1130 GMT, firmer than the 160.10 to the dollar it closed at on Wednesday.
Dealers said central bank action on Wednesday to tighten liquidity led to a shortage of naira cash to buy dollars.
The central bank on Wednesday sold 142.1 billion naira in treasury bills and $318 million at 155.83 naira to the dollar at its bi-weekly foreign exchange auction, both aimed at mopping up naira liquidity.
The Wednesday move also led to a spike in overnight lending rates to more than a two-year high of 35 percent.
“Bond yields are responding to the illiquidity in the system. Investors are selling the shorter maturities to fund naira positions,” one dealer told Reuters.
“The naira is so illiquid. Bonds are on a sell zone.”
Yield on the most liquid 3-year bond spiked to 16.45 percent, from 15.23 percent on Wednesday. While 5-year
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