CBN loans N848b to banks monthly

 By Collins Nweze
The Nation

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 in lending.

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 Allocation.

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 Federal Government.

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 per cent.