Banks Return to Borrowing from CBN after CRR Debits
Again, a number of liquidity-starved deposit money banks (DMBs) have returned to the Central Bank of Nigeria’s (CBN) standing lending facility to raise funds to meet their daily requirements.
The recent visit to the apex bank standing lending window came after about N423 billion cash reserve requirements debits were slammed on local lenders for failing to meet the loan target.
The debits reduce the available liquidity in the financial system in the absence of additional inflows from maturing instruments. Analysts however predicted that the liquidity level would worsen further in the week.
This is expected to push short-term benchmark rates in the money market upward, the rate which currently trending in the double-digit mid-point level could worsen to a double-digit high – seen in the previous month at about 20%.
Recently, improved funding in the financial system has caused lenders to reduce withdrawal requests from the borrowing window, following large inflows from FAAC, coupon payments others.
At the close of business yesterday, analysts said despite the inflow of ₦10 billion from the open market operations (OMO bills) maturity, the liquidity in the financial system declined by 50.21%.
The large withdrawals dragged liquidity in the financial to close at ₦34.77 billion. TrustBanc Capital told investors that the drawdown is traceable to increased withdrawals at the Standing Lending Facility.
On Tuesday, analysts said a sum worth ₦89.16 billion, 123% above a withdrawal of ₦39.95 billion on Monday. As a result, funding rates, both repo and overnight lending rates, expanded by 25 basis points and 45 basis points to close at 13.38% and 14.13%, respectively.
“…we expect bond auction debit worth ₦545.26 billion to submerge liquidity levels into deficit whilst hiking funding rates”, TrustBanc Capital said in its market note. #Banks Return to Borrowing from CBN after CRR Debits
