Liquidity in the banking and financial system is expected to boost up, leading to improvement or decline in lending rates as N148.86 billion treasury bills mature this week.
This is coming as analysts are optimistic of improvement in the banking and finance sector in 2018 following record stability in the macroeconomy even as Nigeria has come out of recession.
“This week, T-bills worth N148.86 billion will mature via primary market; hence, we expect boost in financial system liquidity with resultant decline in interbank lending rates”, analysts at Cowry Asset Management limited said.
Last week, interbank lending rates decreased across all tenure buckets amid ease in the financial system liquidity. Particularly, treasury bills worth N218.22 billion matured via Open Market Operations (OMO).
Consequently, NIBOR for Overnight, 1 month, 3 months and 6 months tenor buckets fell week-on-week to 5.00 percent (from 6.08%), 13.51 percent (from 15.26%), 15.39 percent (from 16.41%) and 17.19 percent (from 18.06%) respectively. Elsewhere, the Nigerian Inter-Bank Treasury bill True Yield (NITTY) also moderated for most maturities tracked following renewed buy pressure: yields on the 1 month, 6 months and 12 months maturities fell to 10.24 percent (from 11.31%), 14.82 percent (from 15.20%) and 16.32 percent (from 16.41%) respectively. However, yields on the 3 months rose to 12.93 percent (from 12.89%).
Uche Uwaleke, Associate Professor and Head, Banking and Finance department Nasarawa State University, outlined key events that would drive the banking and finance industry in 2018 to include but not limited to: first, international crude oil price to the extent that a sudden collapse would affect banks with too much exposure to the oil industry. Favourable crude oil price will lead to accretion in external reserves and help improve liquidity in the forex market
Second, timely implementation of the 2018 budget will improve liquidity in the banking industry. Capital spending especially in the area of critical infrastructure such as power and roads will reduce cost of banking business and could lead to a reduction in interest rates
Third, monetary policy easing on the back of receding inflation rate will equally improve banking sector liquidity and will go a long way in reducing the over 15 percent non-performing loans in the industry.
Fourth, the federal Government’s strategy of reducing domestic borrowing in favour of external borrowing will contribute to bringing down interest rates.
Fifth, the efforts of the Presidential Enabling Business Environment Council will result in a further improved ranking for Nigeria on the World Bank’s ease of doing business. Improved business environment will boost foreign investors’ confidence in the economy. This will have salutary effects on the stock market especially on banking stocks.
HOPE MOSES-ASHIKE
