Cash scarcity hit Nigeria’s commercial banks on Friday as they struggled to buy dollars from Central Bank of Nigeria for their customers.

This forced the rate banks lend to each other to around 20 percentage points on Friday after the Central Bank's sale of dollar forwards to offset a backlog of forex obligations drained cash from the money market.

The overnight lending rate stood at 50% against 29.33% the previous day because commercial banks scrambled for cash on to pay for the dollar purchase at CBN.

The lending rate among commercial banks opened at 70% on Tuesday, but fell to around 29.33% on Thursday after the injection of cash from matured treasury bills repayment by the Central Bank provided more cash.

Traders said the amount of cash in the market started with a shortfall of 206.96 billion Naira less than the 239.53 billion shortfall Friday, last week.

This put the money market under pressure to look for money to finance their forex and treasury bill purchases from the Central Bank.

"The money market is in repo because of the sale of open market operations treasury bills and funding for special foreign exchange auctions by the central bank, putting the market in a tight position," one senior currency trader told Reuters.

Traders said the cost of borrowing in the interbank money market was likely to fall next week because of expected cash injections from the next round of monthly budgetary allocations to government agencies and repayment of matured treasury bills.