WITHIN a one-week period, the amount of liquidity in the banking system dropped by N557.3bn or 71 per cent to N220.7bn, a report by Afrinvest has said.
The banking system liquidity had last week Monday risen to N778bn, owing to the Central Bank of Nigeria’s four weeks of non-issuance of new Open Market Operations bills.
The OMO is the apex bank’s short-term market instrument to mop-up excess liquidity in the banking sector.
The CBN had, last Tuesday, debited banks N509.4bn on Cash Reserve Ratio, which plunged system liquidity to NN268.6bn.
The apex bank had also, in a bid to tackle the rising inflation, increased the CRR to 27.5 per cent in January.
According to the report, liquidity further decreased by another N47.9bn to N220.7bn in one week.
The further dip in system liquidity was due to the absence of inflows from maturities and Federal Account Allocation Committee disbursements during the week.
Liquidity is expected to improve as maturing Treasury Bills and Open Market Operation instruments, worth N56.8bn and N88.0bn respectively, hit the system.
The apex bank had slated to roll over the maturing Treasury Bills at the Primary Market Auction on Wednesday, the report added.
Last month, the Governor of the Central Bank of Nigeria, Godwin Emefiele, said that despite the challenges facing the economy, the banking sector remained strong, resilient and could effectively finance the economy.
He said, “The Nigerian banking system remains very strong and resilient. Unlike in other climes, the Nigerian banking system appears to be one of the well regulated industries in the world today. As at May 2019, Non-Performing Loans in the industry was 11.1 per cent; as at June 2020, it had dropped to 6.4 per cent.
“For Capital Adequacy Ratio, which measures the size of capital that bank deploys into risk asset, as at June 2019, CAR was 15.2 per cent, but as at June 2020, it remained flat at 15 per cent.
“On liquidity ratio, by August 2019, it was 48 per cent but as at June 2020, it had dropped to 37 per cent.”
