CBN's Lending to Deposit Money Banks Hits 2020 High

CBN’s Lending to Deposit Money Banks Hits 2020 High

Reflecting the Central Bank of Nigeria’s hawkish liquidity bias, Standing Lending Facility (SLF) position of deposit money banks (DMBs) hits 2020 high today at ₦350 billion.

In the money market, Chapel Hill Denham said it observed that funding pressures increased today, despite a relatively small open market operation (OMO) repayment of ₦16 billion.

The financial system opened in deficit of ₦276.7 billion from ₦95.3 billion yesterday.

Analysts at Chapel Hill noted that the SLF position of DMBs was at a 2020 high of ₦350.6 billion.CBN's Lending to Deposit Money Banks Hits 2020 High

According to the firm, this reflects the CBN’s recent hawkish liquidity bias through consistent CRR debits.

Consequently, the Open Buy Back (OBB) and Overnight (OVN) rates rose by 15 bps and 50 bps to 19.75% and 21.50% respectively.

Also, the fixed income recorded a mixed performance due to liquidity tightening.

Analysts explained that against the backdrop of the tight system liquidity, sentiments were generally mixed in the market.

Discount rates on benchmark Nigerian Treasury Bills (NTBs) and OMOs increased by an average of 6 basis points (bps) and 11 bps to 2.35%% and 5.06% respectively.

Also, in the bond market, analyst at Chapel Hill said they saw increased duration aversion, as yields on long term bonds rose by 6 bps to 9.97%.

To analysts, this reflects an increased cautiousness by investors.

On the other hand, yields compressed at the short and mid end of the curve by 50 bps and 7 bps to 4.21% and 7.33% respectively.

“The sustained rally at the short end of the curve was enough to push the benchmark curve lower by an average of 14 bps to 7.48%.

“We think bond yields are still going to be sup-ported by large coupon coupons in the second half of the month”, Chapel Hill Denham said.

Meanwhile,  the USD/NGN rate was flat at the Investors & Exporters Window (IEW) and Parallel market at ₦386.50 and ₦461 respectively.

However, the CBN finally adjusted the official rate by 5.3% to 381 from 361, in line with its recent objective of collapsing Nigeria’s multiple FX rate structure.

The external reserves stood at US$38.15 billion having dropped by 0.1% month to date on 06 July 2020.

Nigeria’s Balance of Payment Plunged to Deficit in Q1

CBN’s Lending to Deposit Money Banks Hits 2020 High