Banks Placements with CBN Surge as Loan Appetite Tightens
With deposit money banks (DMBs) sustaining activity in the Standing Deposit Facility (SDF), financial system conditions continue to improve in the absence of open market operations and other primary market actions thus far this week.
With a heightened default rate and surge in industry non-performing loans above the prudential guideline, MarketForces Africa can report that top players have scaled back lending to the real sector.
Many banks have shifted focus to investment securities, which have been attracting significant fund placements, with capital rotating around the Apex Bank deposit facility.
Local lenders have been altering their investment placement to match macroeconomic conditions in the country, with selective lending in some economic segments where momentum remains healthy.
On Wednesday, the short-term benchmark interest rates moved in different directions, reflecting the liquidity conditions in the banking system on Wednesday.
According to the market report, the financial system liquidity settled higher at ₦3.68 trillion, representing only a marginal ₦49.35 billion improvement from the previous session’s surplus level. Investment firms reported that this was mainly driven by increased bank placements at the Central Bank of Nigeria’s (CBN) SDF window.
Tight lending appetite and elevated yields in the fixed income market kept banks glued to 22.50% SDF rate from depositing with the CBN.
According to a market report released by investment firms, total lodgments at the window increased from ₦2.55 trillion in the previous session to ₦3.61 trillion.
However, average funding cost fell by 5bps to 22.63%, as the Open Repo Rate (OPR) remained steady at 22.50%, while the Overnight Rate (OVN) fell by 10bps to 22.76%.
Nigerian Interbank Offered Rates exhibited mixed performance on Wednesday, with the overnight rate dropping 6bps to 22.75%, indicating improved system liquidity. Barring any funding activities, market analysts expect the funding rate to stay moderate in the next session.
In the Treasury Bills segment, secondary market yields likewise demonstrated varied movements.
The average yield on Nigerian Treasury bills closed positively, declining 3bps to 17.51%, reflecting enhanced investor sentiment and a more supportive climate in the secondary market. Naira ‘Swings Right’, Touches Intraday Low of N1,345
