The Nigerian banking sector is currently experiencing a serious cash shortage, as banks struggle with a liquidity deficit that has now reached a staggering N1.58 trillion. This is a significant increase from the previous day’s deficit of N1.064 trillion, signaling worsening financial strain within the system.
Due to this cash shortfall, banks are once again relying on the Central Bank of Nigeria (CBN) for emergency funds through its Standing Lending Facility (SLF). However, despite withdrawing large sums from the facility, the deficit has continued to widen, putting more pressure on the financial system. The situation has been further strained by the midweek auction of treasury bills, which has drained more cash from circulation.
To ease this pressure, market analysts are looking forward to the settlement of treasury bills worth approximately N504 billion, which is expected to inject liquidity back into the banking system on Thursday. This might help stabilize interbank lending rates.
Meanwhile, different financial indicators are showing mixed trends. For instance, the Nigerian Interbank Offered Rate (NIBOR), which measures the cost at which banks lend to each other, has displayed varied movements across different borrowing periods. Similarly, the Open Repo Rate (OPR), a measure of short-term borrowing costs, has dropped slightly by 0.06% to 32.29%. On the other hand, the Overnight Lending Rate, which represents the cost of borrowing money overnight, has increased by 0.13% to 32.83%.
Financial analysts believe that the impact of the treasury bills settlement, worth approximately N505 billion, will likely keep interbank rates stable. Additionally, the Central Bank of Nigeria is expected to lower interest rates more than initially anticipated, following adjustments to inflation data.
On a more positive note, mutual funds have been performing well, and analysts expect that the current trend of positive real returns will benefit investment portfolios.
