Liquidity: Banks Borrow N1.8trn from CBN Window
Deposit money banks borrowed about N1.8 trillion from the Central Bank of Nigeria’s (CBN) standing lending facility (SLF) window to support liquidity requirements, according to updates from the Broadtsreet.
Most of the borrowers were smaller banks, while cash-rich lenders demanded higher rates to free excess liquidity. Reflecting the prevailing liquidity condition, Afrinvest Limited said in a note that there was about N180 billion outflow from the standing deposit facility relative to injection from the borrowing window.
Last week, liquidity levels in the financial system came under intense pressure despite the fact there were inflows. However, banking system liquidity tightness had been so deep that those inflows had minimal effects until the latter part of the week.
The short-term rates went down significantly eventually after Remita inflows, and FGN coupon payments worth N143 billion hit the financial market. Despite the tight liquidity pressures, the system deficit narrowed significantly to N57.7 billion, representing a significant improvement from N361.1 billion shortfall recorded in the previous week.
TrustBanc Capital Limited said this turnaround followed a week marked by heavy reliance on the CBN’s Standing Lending Facility (SLF), where DMBs accessed N1.78 trillion.
Still, interbank rates remain elevated because outflows relating to FX sales to authorised dealer banks reduced liquidity size in the banking system, and cash reserve activity added an additional layer of pressure on the system.
However, funding obligations were generally lower last week ahead of the bond and Treasury bills auction in the new week. Some local banks rebalance their investment in the debt securities market, reflecting liquidity positions at each point.
The week started with system liquidity showing a deficit of about N60 billion, and this remained negative throughout most of the week. However, by the week’s end, it improved to a positive balance of ₦396.75 billion – primarily attributed to significant Remita inflows and FGN Bond coupon payment.
The market also recorded debits associated with the Central Bank foreign exchange market interventions and cash reserves ratio activities. Interbank rates declined sharply week on week as bank funding demand eased.
As a result, the overnight policy rate fell by 5.86% to 26.09%, while the overnight rate decreased by 5.60% to 26.88% compared to the previous week. #Liquidity: Banks Borrow N1.8trn from CBN Window Naira Depreciates Ahead of 2-Week Automated FX Trading Trial
