By Collins Nweze
The Central Bank of Nigeria (CBN) advances an average of N848 billion
to Deposit Money Banks monthly to boost their liquidity, The Nation
investigation has shown.
The fund, a Standing Lending Facility (SLF), given at 14 per cent, is
an overnight credit available on banking days between 2 pm and 3.30 pm,
with settlement done on same day value.
The CBN had at last month’s Monetary Policy Committee (MPC) meeting
maintained the Monetary Policy Rate (MPR) at 12 per cent, and kept the
symmetric corridor of +2 per cent around the MPR for SLF. However, the
SLFs are available only to banks and discount houses that have executed
the Nigerian Master Repurchase Agreement (NMRA) with the regulator.
The NMRA, covers the operations of the SLF and addresses issues
relating to pricing, duration, custodian as well as default resolution
According to the CBN Economic Reports for July, first and second
quarters’analyses, the regulator advanced a cumulative N5.94 trillion to
the beneficiary financial institutions during the period, bringing the
monthly average to N848.7 billion.
A total of N2.78 trillion SLFs were advanced to banks in the first
quarter, the figure dropped to N2.56 trillion during the second quarter,
and stood at N599.7 billion in July this year. The decline in the SLF
demanded in the second quarter, compared to the first, this was
attributed mainly to the adjustment in the investment pattern of banks
following the restrictions placed on standing facilities by the CBN in
the third quarter of last year.
The SLFs intakes are expected to rise further after the apex bank on
August 7, mopped up over N1 trillion from the financial system.
Subsequent mop ups, following the increase in the Cash Reserve Ratio on
public sector deposits rose by 38 per cent to 50 per cent.
The total Standing Deposit Facility (SDF) was N6.1 trillion during
the second quarter of the year, representing a decline of 84.5 per cent
below the level in the preceding quarter. The development was attributed
to the liquidity condition in the banking system during the quarter.
The rate for the SDF was maintained at 10 per cent, or two per cent
below the MPR.
July also saw a daily average SLF of N14.17 billion advanced for the
23 working days, while interest received stood at N0.36 billion.
CBN data indicated that during the month, total assets and
liabilities of the DMBs amounted to N22.7 trillion, showing an increase
of 0.8 per cent above the level at the end of the preceding month.
The regulator’s data showed that the level of liquidity in the money
market further increased in July due to the injection of N1, 266.18
billion. The injections comprised the repayment of OMO matured Bills,
Statutory Revenue Allocation (SRA) and Value Added Tax (VAT) to the
Federal, states and local governments, Joint Venture Cash call and
Subsidy Re-investment and Empowerment programme (SURE-P), as well as
contractual obligation and arrears of February Statutory Revenue
Also, there was a N11.9 trillion banks’ credit to the domestic
economy, which rose by 0.4 per cent above the level in the preceding
month. The breakdown showed that relative to the level at the end of the
preceding month, credit to both the private sector, state and local
governments rose by 0.9 and 9.4 per cent, respectively, which more than
offset the 11.1 per cent decline in credit to the Federal Government.
Total specified liquid assets of the banks stood at N7.6 trillion,
representing 49.5 per cent of their total current liabilities. At that
level, the liquidity ratio fell by 6.6 percentage points below the level
in the preceding month, but was 19.5 percentage points above the
stipulated minimum ratio of 30 per cent.
The loans-to-deposit ratio, at 34.1 per cent, was 9.8 and 45.9
percentage points below the level at the end of the preceding month and
the prescribed maximum ratio of 80 per cent, respectively.
However, during the second quarter ended June, banks’ total assets
and liabilities stood at N22.4 trillion, , representing an increase of
one per cent over the level at the end of the preceding quarter. The
funds, which were sourced, largely, from reserves and increased
mobilization of demand deposit liabilities, were used mainly to extend
credit to the private sector and acquisition of unclassified assets.
Equally, banks credit to domestic economy rose to N11.9 trillion, 5.3
per cent above the level in the preceding quarter. The development was
attributed, largely, to the 14.3 per cent increase in claims on the
The loans-to-deposit ratio, was at 43.9 per cent, 5.6 percentage
points above the level at the end of the preceding quarter, and 36.1
percentage points below the prescribed maximum ratio of 80 per cent.
The second quarter also saw money market rates influenced by the
liquidity condition in the banking system. Monetary Policy stance
remained largely restrictive as the MPR was maintained at 12 per cent.
The Liquidity Ratio, Cash Reserve Requirement (CRR) and the Net Open
Position were also retained at their previous levels of 30, 12 and one
per cent, respectively. Money market indicators were relatively stable
in the review quarter. However, on two occasions, the CBN offered
special Open Market Operation auctions at fixed rates of 12.75 and 12.35