The patronage by deposit money banks of the lending window of the Central Bank of Nigeria (CBN), known as Standing Lending Facility (SLF) rose by 65.46 percent to N1.4 trillion in July compared with N829.79 billion in the month of May 2019.
“It simply means that the financial industry was liquidity stressed during that period in the sense that the banks had to borrow so much from the Central Bank to meet short term liquidity gaps within that period,” Johnson Chukwu, managing director/ceo, Cowry Asset Management Limited told Businessday.
The CBN’S economic report for the month of July released on its website shows that the total SLF granted during the review period was N1.4 trillion, inclusive of Intra-day Lending Facility (ILF) converted to overnight repo.
Daily average was N68.65 billion in 20 transaction days in July 2019 as against N46.10 billion in 18 transaction days in May of the same year. The total interest earned was N94.80 billion in July compared with N52 billion in May 2019.
Chukwu said the other thing to look at is FAAC allocation in terms of the amount that went to the states. “It could be indicative of the fact that liquidity was not coming into the system or could be that CBN had engaged in massive mop up earlier that stressed the banks, it’s not because the banks are aggressively lending. It is because of the liquidity management of the CBN where the banks at any point in time do not have liquidity that they will have to resort to the CBN. But it’s a seasonal issue.”
“I am sure with the maturing treasury bills that will come into the system shortly that will reverse,” Johnson said further.
A total of N549.4 billion from maturing Treasury Bills and Open Market Operation (OMO) is expected to hit the market on Wednesday and Thursday this week.
However, the Standing Deposit Facility (SDF) declined by 35.73 percent to N1.2 trillion in July 2019 from N1.8 trillion in the preceding month.
The report revealed that the total SDF granted during the review period was N1.2 trillion with a daily average of N130 billion in 19 transaction days.cost incurred on SDF in the month of July stood at N0.35 billion as against N0.59 billion incurred in May 2019.
According to the report, total assets and liabilities of the banks amounted to N39. 62 trillion at end-june 2019, showing a 0.2 per cent increase, compared with the level at the end of the preceding month.
Funds were sourced, mainly, from foreign liabilities, mobilisation of time, savings and foreign currency deposits and reduction in claims on central bank. The funds were used mainly, to acquire foreign assets, shore up capital accounts and pay off demand deposits.
