Banks Raise Funds from CBN to Ease Liquidity Pressure
As liquidity pressures persist in the money market, Nigerian deposit money banks maintain their borrowing spree at the Central Bank of Nigeria’s (CBN) standing lending facility (SLF) despite a N300 billion cash reserves debit refunded to local lenders.
Following elevated liquidity pressures in the financial system, cash-rich local lenders demand higher rates, which pushed interbank borrowing rates higher, according to analysts.
Following the monetary policy authority’s hawkish switch that started in May 2022, rates in the money market have seen a repricing as participants take cognizance of rising inflation trend reading.
Ahead of the consumer price index data released this week, analysts have expressed mixed reactions to expectations as the naira crisis abates. In February, Nigeria’s headline inflation rate printed at 21.91%.
Last week, the financial system ended on a deficit balance of ₦160.70 billion, analysts at TrustBanc Capital Limited said in a note. Analysts recalled that the week started with a surplus balance of ₦43.26 billion, after recovering from a 7-day deficit run.
It was noted that the deficit run in the market was initially buoyed decision of the CBN to refund cash reserve (CRR) debits worth ₦300 billion to deposit money banks.
However, the liquidity needs of banks intensified throughout the week, making away with an aggregate of ₦686.59 billion from the Standing Lending Financing window of the CBN, TrustBanc Capital said in a market brief.
As a result, analysts said the system was submerged into a deficit and it expanded through Thursday, keeping funding rates at 18% levels.
Save for cash reserves refunds by the apex bank, analysts said they expect the deficit in the system to expand further while funding rates remain elevated.
Cordros Capital estimated that given the thin maturity profile over the coming weeks, the absence of any significant inflows into the system next week should keep money market rates elevated over the short term.
Nonetheless, analysts at the investment banking firm noted a significant maturity at the tail-end of the month of about N759.00 billion, which will be accompanied by coupon payments that may cause rates to descend. # Banks Raise Funds from CBN to Ease Liquidity Pressure
