Nigerian banks are paying high interest rates, about 13 per cent, to borrow from one another.

The lending rates climbed to16% on Friday from about 13% at the end of last week, as the central bank debited commercial banks' accounts for dollar purchases and also issued treasury bills to reduce the amount of money in circulation.

The central bank sold dollars twice this week to clear a backlog of demand for companies and private individuals to ease pressure on the Naira.

Traders said the regular dollar auctions and the treasury bill sales drastically reduced the amount of money available. The money market opened with a cash deficit of about 2.3 billion Naira on Friday, compared with a deficit of 45.64 billion Naira last week.

The central bank on Friday offered to sell about 40 billion Naira in treasury bills to further reduce the amount of cash.

Traders said money market rates may continue to rise next week as the central bank increases the frequency of its dollar sale.