Banks borrowed N27.46 trillion from the Central Bank of Nigeria, CBN, in six months, according to the apex bank’s half year report on financial sector performances released yesterday.
The 2017 half-year Financial Markets Activity Report, said loans came in the form of Standing Lending Facility, SLF, including the Intra-day Lending Facilities, ILF. The standing facilities were accessed by the banks to enable them either meet their short-term liquidity needs or place their surpluses. The rates for SDF and SLF remained at nine and 16 per cent, respectively.
The report said the SLF was utilised by the banks in order to enable them square up their positions after inter-bank market trading hours. It said of the total SLF granted in the review period, N20.62 trillion was conversion from unsettled ILF.
The SLF is an overnight CBN credit available on banking days between 2 pm and 3.30 pm, with settlement done on same day value. Funds were sourced mainly from time, savings and foreign currency deposits, as well as accretion to unclassified assets. The funds were used, largely, to extend credit to the private sector and payment of claims on demand deposit.
According to the report, signed by CBN Director, Financial Markets Department, Alvan Ikoku, said the banks continued to access the CBN’s Standing Facilities window to square up their positions either by borrowing from the SLF window or depositing excess reserves at the standing deposit facility (SDF) window of the CBN at the end of each business day.
The report said the SLF was utilised by the banks in order to enable them square up their positions after inter-bank market trading hours. It said the patronage of the facility reflected the liquidity position during the first half of the year, as requests were at its lowest on January 2, 2017 with N83.61 billion and at its highest on April 18, 2017 with N478.54 billion.
“In view of the 122 transaction days within the period, average daily request amounted to N225.14 billion. Consequently, the cumulative interest received on the facilities was N21.13 billion at 16.00 per cent. In comparison with the corresponding period of the previous year, total SLF transactions amounted to N5.07 trillion, out of which N4.87 trillion was conversion from ILF.
It said the average daily request stood at N59.76 billion, while the cumulative interest received on the facilities was N2.92 billion at the applicable rates of 13.00 and 14.00 per cent. The higher level of transactions over the corresponding period in 2016 was occasioned by the tight monetary operations in 2017.
The CBN report said patronage of the SDF reflected the liquidity unease in the system as less funds were deposited compared with the corresponding period of the preceding year.
“The reduced patronage was due to tighter monetary operations through increased Open Market Operation, OMO, auctions. The foreign exchange interventions, in addition, moderated the cash balances in the banking system. The restriction of N7.50 billion maximum remunerable SDF per bank remained applicable.
The total request for SDF in the review period was N5.1 trillion, indicating a daily average volume of N45.54 billion as against a total SDF of N12.69 trillion and daily average of N102.42 billion in the corresponding period of 2016.
Further analysis of the transactions indicated that the highest amount of SDF was N121.50 billion on February 2, while the lowest was N0.30 billion on March 20.
Consequently, the interest paid on SDF amounted to N1.99 billion at the rate of 9.00 per cent in the first half of 2017, as against N2.84 billion at 4.00 per cent from January 1 to March 21 and 7.00 per cent from March 22 to June 30, 2016.
It said the total value of transactions in the funds market stood at N864.93 billion in the first half of 2017, as against N513.11 billion in the corresponding period of 2016. The high level of activity in the review period was attributable to liquidity squeeze occasioned by tight monetary operations.
Further analysis of the transactions indicated that open-buy-back (OBB) accounted for 89.42 per cent at N773.42 billion, while the unsecured recorded 10.58 per cent at N91.51 billion.
In the preceding year, OBB accounted for less at N203.54 billion or 39.67 per cent compared to the unsecured segment which recorded N309.57 billion or 60.33 per cent. The shift in patronage in favour of OBB in the review period was attributable largely to greater risk aversion by market participants.