Banks Raise N631bn from CBN Facility to Stay Liquid
A large number of Deposit money banks (DMBs) in Nigeria have continued to pitch their tents in the Central Bank (CBN) standing lending facility (SLF) to stay liquid amidst funding pressures in the financial system.
The sum raise followed about N881 billion access via the CBN window last week amidst liquidity tightening in the financial system.
In the money market, short-term benchmark rates have surged; nearing 20% following the monetary authority’s decision to hike the policy rate in March 2023 to 18%.
Analysts believe that increased short-term rates reflect the latest market dynamics that followed the double-digit inflation rate in the country.
Market data showed that the Nigerian interbank offered rate adjusted. Due to a tight funding profile in the system, the open repo rate (OPR) and the overnight lending rate (OVN), increased to 18.50% (from 16.75%) and 19.00% (from 18.00%), respectively.
The deficit in the financial system expanded by 5% to close at ₦482.43 billion. Although FAAC disbursement worth ₦453.61 billion, and sizeable maturities worth ₦124 billion flow into the system.
However, analysts at TrustBanc Capital said local banks withdrew ₦631.28 billion via the CBN Standing Lending Facility (SLF) window, thus depressing the impact of the inflows.
Yesterday, funding rates remain elevated at 16.75% and 18.00% respectively. Analysts said that given the current liquidity condition, they expect rates to continue trading at high levels.
System liquidity closed the previous week with a deficit balance of ₦404.58 billion, marking the deepest deficit since the turn of the year, according to TrustBanc Capital.
On account of a weak inflow record, the financial system struggled with thin liquidity, worsened by Nigeria’s Debt Management Office (DMO) bond auction debit totalling ₦563.36 billion.
As a result, local banks took to the Standing Lending Facility (SLF) window for short-term funding needs, making away with ₦880.89 billion, the largest single-week withdrawal since year-start.
