To meet their short-term liquidity needs, Nigerian deposit money banks borrowed N1.3 trillion over three days from the Central Bank of Nigeria’s (CBN) standing lending facility.
In the absence of major inflows, the ongoing borrowing increased the short-term benchmark rate, keeping the financial system in deficit for several days. Despite reporting increasing revenues, local lenders are cash-strapped. Analysts claim that excessive cross-counter deposit withdrawals by consumers, who were hoping to get new note printing from the apex bank, have hurt the cash position of Nigerian deposit money institutions.
Due to financing constraints, interbank rates in the money market have been trending at double-digit highs. To improve their liquidity situation, several banks are selling their holdings of government bills. Their individual acts had an effect on the fixed income market, where the yield curve is still moving upward.
According to a market brief from TrustBanc Capital, DMBs rushed the SLF Window on Wednesday to meet their short-term funding needs, pocketing $429.16 billion in total.
Analysts’ records revealed that a total of 400 billion dollars was accessible on Monday, while banks drew 461 billion dollars from the CBN on Tuesday. This led to the most recent borrowing by Nigerian lenders. Notwithstanding inflows, MarektForces Africa estimated that the financial system’s liquidity shortfall increased by nearly 31% to 343.06 billion, despite inflows from coupon payments worth ₦134.25 billion on Tuesday.
Then, again, on Wednesday the financial system deficit surged by about 128% to close at ₦782.03 billion, driven by standing lending facility withdrawals, in addition to debits for Bond auctions, according to TrustBanc Capital.
Following the Debt Management Office primary market auction for the FGN bond on Monday, the financial system was debited by a settlement sum worth ₦552.47 billion – Including non-competitive allotment.
As a result, analysts noted that interbank funding rates held the firm at market cap levels – 18.63% and 19.00%, respectively.
“In the absence of any significant inflows to the system, we expect the struggle for scarce liquidity to linger, while rates hold steady at market cap levels”, analysts at TrustBanc Capital Limited said. #Banks Borrow N1.3trn from CBN in 72 Hours
