A new report by TrustBanc Capital, has it that Nigerian deposit money banks borrowed about N1.3 trillion from the Central Bank of Nigeria’s (CBN) standing lending facility in three days to shore up the short-term liquidity requirements.
The sustained borrowing pushed the short-term benchmark rate upward in the absence of significant inflows, keeping the financial system in deficit for successive days. Though local lenders reported higher profits, they are stretched on cash.
According to analysts, Nigerian deposit money banks’ cash position has been weakened by high deposit withdrawals by customers across the counters amidst an expectation that the apex bank will disburse fresh new note prints.
In the money market, interbank rates have been trending at double-digit highs due to funding pressures.
A large number of banks are selling their treasury bills holdings to boost liquidity position. Their respective actions impacted the fixed income market where yield curve continues to shift upward.
In a market brief, TrustBanc Capital said DMBs flooded the SLF Window on Wednesday, to cover their short-term funding obligations, making away with a total sum of ₦429.16 billion.
Nigeria’s lenders’ latest borrowing came after analysts’ records showed that a total sum of ₦400 billion was accessed on Monday, and on Tuesday, banks borrowed ₦461 billion from the CBN.
Yesterday, the financial system deficit surged by about 128% to close at ₦782.03 billion, driven by standing lending facility withdrawals and debits for Bond auctions, according to TrustBanc Capital.
Following the Debt Management Office primary market auction for the FGN bond on Monday, the financial system was debited by a settlement sum worth ₦552.47 billion – Including non-competitive allotment.
As a result, analysts noted that interbank funding rates held the firm at market cap levels – 18.63% and 19.00%, respectively.
“In the absence of any significant inflows to the system, we expect the struggle for scarce liquidity to linger, while rates hold steady at market cap levels”, analysts at TrustBanc Capital Limited said.
