Nigerian banks borrowed N2.8 trillion from the Central Bank of Nigeria’s standing lending facility to close their funding gaps, investment firm Afrinvest disclosed in a note recently.
The local lenders flocked to the CBN lending window to borrow funds to satisfy their daily liquidity requirement amidst double-digit rate pricing.
The short-term cash shortage has made local lenders net borrowers but some banks with huge liquidity also made deposits at the deposit window.
Analysts reported that financial system liquidity improved at the close higher on Friday compared to the previous week, supported by OMO maturities and FGN bond coupon inflows.
The amount in the financial system increased strongly as inflows from FGN bond coupon payments worth N402.96 billion saturated the system, said Cordros Capital Limited.
For most of the week, liquidity was negative, with most Deposit Money Banks relying on CBN’s standing Lending Facility to fund their operations, AIICO Capital Limited revealed.
Due to borrowing by the commercial banks, liquidity level in the money market inched higher by 62.4 percent week on week to close at N1.2 trillion, Afrinvest Limited said in a note.
Investment banking firms anticipate sufficient system liquidity in the new week due to FGN bond coupons and FAAC inflows.
However, debits from NTB and FGN bond auctions may further exacerbate the liquidity situation.
The market expects to see inflows from FAAC disbursements totaling N828.08 billion and FGN bond coupon payments worth N202.45 billion in the week.
Consequently, the Open Repo Rate and the Overnight Rate decreased by 151 basis points and 176 basis points, settling at 29.69 percent and 29.97 percent, respectively.
In a related development, cash-rich commercial lenders, however, parked N566 billion into the standing deposit facility of the CBN.
At the previous monetary policy committee meeting, the CBN capped the Standing Deposit Facility rate to 25.75 percent on deposits of up to N3 billion, with a fixed rate of 19.0 percent on excess deposits, thus discouraging banks’ utilisation of this window.
The CBN recently lifted its suspension on banks borrowing from its window, known as the Standing Lending Facility.
The apex bank also pegged the lending rate at 31.75 percent following the decisions made at the 296th meeting of the Bank.
