LAGOS Oct 21 (Reuters) – Nigeria’s overnight interbank rate fell on Friday after the central bank repaid matured treasury bills and cash meant for government’s capital projects reached the system, traders said.

Overnight lending rates fell to 11 percent, below the central bank’s benchmark 14 percent, from 15.5 percent the day before. Rates had risen above 100 percent at the start of the week because of a central bank dollar auction.

Traders said the bank repaid about 138.7 billion naira ($456 million) in matured treasury bills on Thursday to boost liquidity. They also said the market was flush with cash after the central bank sold fewer dollars than expected and returned excess naira.

The bank sold $313 million at a special auction meant to clear a backlog of dollar demand .

Traders said an unspecified amount of naira was released on Friday to fund government spending on capital projects and that additional inflows was expected before the end on Friday.

($1 = 304.25 naira) (Reporting by Oludare Mayowa; Editing by Chijioke Ohuocha, Larry King)