By 
The Central Bank of Nigeria’s (CBN) Cash reserve debits refund released to deposit money banks (DMBs) in Nigerian halted the deficit run in the financial system on Monday.
With the inflows, the financial system’s liquidity level improves, forcing a downward rate repricing on short-term benchmark rates in the money market.
As a result of pressures on their respective liquidity position, banks have been borrowing from the CBN lending facility. Deposited sum at the alternative window for cash-rich lenders has been minimal –signalling possible pressures on liquidity.
At the close of business, there is N82.95 billion net balance in the CBN standing lending facility. On the other hand, the standing deposit facility’s net value printed at N2.282 billion.
On March 28, the liquidity level in the financial system was N482.43 billion negative, and it stretched to N617.51 billion a day after. It moderated to N345.71 billion on 30 March and worsened to N415.28 billion on March 31.
In the latter part of March, some banks have been accessing funds from the apex bank’s window to patch gaps in daily liquidity level requirements.
Demand for liquidity forced local banks with Treasury bills holdings to unpack bills in the secondary market to raise cash.
With the CRR refund on Monday, from a negative level, the financial system liquidity shifted to a positive balance. Thus, short-term benchmark rates declined after sustained pressures.
According to analysts at Lagos headquartered TrustBanc Capital Limited, the financial system started the month of April with ₦43.26 billion surplus, halting a 7-day deficit run.
The positive close was attributed to an 85% decline in the activities of local banks at the Standing Lending Financing (SLF) window, buoyed by CRR refund by the apex bank.
Accordingly, funding rates declined. The Nigerian interbank borrowing rate declined across the board for all maturities tracked as gauges of money market stress eased, Cowry Asset Management said in a brief.
Also, in a contrast to the previous pattern, deposit money banks, majorly the tier-1 lenders, with liquidity sought lower rates in the money market.
Data from the FMDQ Exchange platform showed that open repo and overnight lending rates contracted by about 100 basis points to settle at 17.38% and 17.88%, respectively.
In a market brief, TrustBanc Capital Limited said the size of the activities of DMBs at the SLF window will define the depth of liquidity in the system and the direction of rates.
Liquidity position in the financial system touched the deepest deficit since the turn of the year, due to sustained pressure by DMBs at the Standing Lending Facility window.
For context, an aggregate of ₦3.97 trillion was taken out, accounting for the largest single-month withdrawal since May 2021, TrustBanc said in a note.
Comments