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Stats: 16,671 members, 64,013 Topics, 14,560 Comments. Date: March 24, 2019, 10:09 pm

Olanrewaju Bolaji
The Polytechnic, Ibadan
Mass Communication
Graduate, Nigeria.

As liquidity crunch continues to hold sway in the financial market, commercial banks have continued to access the Central Bank of Nigeria’s (CBN) standing facilities window to square up their positions by borrowing N6.275 trillion from the standing lending facility (SLF) window.

The figure, which is for the period of January 2, 2019 to February 26, 2019, is almost double of N3.7 trillion SLF inclusive of Intra-day lending facilities (ILF) that was converted to overnight repurchase agreement (repo) for the 59 trading days of the fourth quarter of 2018.

Banks had taken N3.234 trillion through the SLF in the 22 transaction days of January and N3.04 trillion in the 18 days of transaction days from February 1 to February 26. Last year, the total SLF inclusive of ILF that was converted to overnight repo stood at N11.21 trillion, with the interest earned on the borrowings by the CBN amounting to N10.63 billion.

Standing Deposit Facility (SDF) window where banks deposit their excess reserves stood at N1.52 trillion for the 40 transaction days from January 2 to February 26, 2019. Excess reserves deposited by banks in the SDF in January stood at N852.01 billion while that of February was N668.75 billion as at yesterday.
This was much lower than N4.4 trillion excess reserves of banks that was deposited at the apex bank in the 59 transaction days of the fourth quarter of 2018. Total SDF for 2018 was N20.18 trillion that earned an interest of N7.25 billion for the banks.

The CBN had since the beginning of the year slowed on its regular mop- up through Open Market Operations (OMO) which it consistently held last year. In the fourth quarter of 2018, the CBN had allotted N5.6 trillion at its regular OMO auctions.

Last week investors’ anticipation of OMO auctions fell flat as the CBN held off in a bid to ease pressure on system illiquidity.

The apex bank conducted only two OMO auctions last week and had issued a no-sale result at the first auction despite the 325.9 per cent oversubscription to its total offer of N30 billion across the 101-day, 178-day and 353-day tenors.

This market, analysts said, was to ease system liquidity which had been short by N518.4 billion. However, at the second intervention, the CBN prorated its allotment – for the first time in months – on its long-term offer of N400 billion due to the significant demand, while the short and medium-term offers of N50 billion and N100 billion witnessed moderate demand.

This week’s inflows worth N388.61 billion of maturing OMO bills and bond coupon payments are expected to ease up liquidity. Traders say N349.64 billion of maturing OMO and N38.97 billion of bond coupon payments will offer support to system liquidity. However, liquidity mop-up and forex intervention by the CBN are likely to exert upward pressure on the overnight lending rate.

Source: www.talkthematter.com.ng/2019/02/banks-borrow-n627trn-from-cbn-in-7-weeks.html

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