Banks’ CBN loans grow 253%, as funds scarcity buffets interbank money market
By Jeph Ajobaju, Chief Copy Editor
Funds scarcity on the interbank money market has stoked a 253 per cent hike in loans taken by banks from the Central Bank of Nigeria (CBN).
CBN data shows the volume of idle cash (liquidity) in the interbank money fell 87 per cent week-on-week (WoW) to N41.41 billion last week from N326.6 billion the previous week.
This is the second consecutive WoW decline in market liquidity, following a similar trend the previous week when market liquidity fell 31 per cent.
The decline in liquidity last week was caused by an outflow of N269.16 billion through FGN bond auction conducted by the Debt Management Office (DMO).
To survive the scarcity of funds, banks increased patronage of the Standing Lending Facility (SLF) of the CBN to meet short term liquidity needs.
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Borrowing up, deposits down
Banks’ borrowing from the CBN via the SLF rose 253 per cent WoW to N632.83 billion last week from N179.03 billion the previous week, per Financial Vanguard.
But banks’ deposit of idle cash with the CBN via the Standing Deposit Facility (SDF) slashed 94 per cent WoW to N6.33 billion last week from N104.44 billion the previous week.
The cost of funds shot up sharply on the interbank money market, reflecting the intense scarcity of funds.
Data from FMDQ shows interest rate on Collateralised (Open Buy Back, OBB) lending rose 425 basis points (bps) to 16.25 per cent last week from 12 per cent the previous week.
Interest rate on Overnight lending rose 367 bps to 16.50 per cent last week from 12.83 per cent the previous week.
Banks grant N61.2tr loans to raise economic activities
Despite grappling with liquidity squeeze, credit granted by banks for economic activities jumped 2.17 per cent to N61.2 trillion in August from N59.9 trillion in July, according to CBN Money and Credit data.
Currency-in-circulation (CiC) rose 0.9 per cent to N3.24 trillion in August from N3.21 trillion in July.
The data shows the N61.2 trillion credit comprised N21 trillion granted the government, which grew 4.4 per cent from N20.1 trillion in July.
A total N40.2 trillion was approved for the private sector, a 1.0 per cent month-on-month (MoM) rise above N39.8 trillion in July.
