By Jeph Ajobaju, Chief Copy Editor
Liquidity squeeze is forcing banks to seek more loans from the Central Bank of Nigeria (CBN) as idle cash in the interbank money market has dipped 2,183 per cent.
Interbank money market liquidity opening level crashed to N12 billion on August 13 from N349.6 billion on August 6, according to CBN data analysed by Financial Vanguard.
Banks’ borrowing from the CBN jumped 2,500 per cent to N489 billion last week from N19.2 billion the previous week. But banks’ deposits with the CBN fell 67 per cent to N25.4 billion from N73.6 billion.
Up to 86 per cent or N420 billion of banks’ borrowing from the CBN was repurchase agreement (repo), 14 per cent or N69 billion through Standing Lending Facility (SLF).
A repo is a short term borrowing in which banks sell their government securities (treasury bills) to the CBN usually on an overnight basis, and buy them back the following day at a slightly higher price.
Also reflecting the severity of the scarcity of funds, the cost of funds remained high throughout the week, with interest rate on Overnight lending rising 3.6 percentage points to 17.25 per cent from 13.7 per cent on Monday.
“Money market rates remained at double digit levels closing the week by 2 basis points higher on average from [Thursday’s] closing,” an analysts at Zedcrest Securities told Financial Vanguard.
“System liquidity remained low at N11.98 billion as some participants stayed camped at the CBN Repo window while others continued to source for deposits from large businesses.
“Subsequently, Open Buy Back (OBB) and Overnight (OVN) rates closed the week at 16.75 per cent and 17.25 per cent respectively.”
