DMBs in short of funds as CBN bails out with N900bn

 Most Deposit Money Banks (DMBs) in the country had issues with cash to meet their immediate financial obligations last week, going by the recent report from Cowry Assets Management Limited.The assets management company, in its recent report stated that there was a recent rush by banks to the Central Bank of Nigeria (CBN) last week, in a bid to borrow a total of N881.53 billion at 14 per cent interest rate.

According to the report, some of the lenders had earlier last week deposited a total of N113 billion with CBN to earn seven per cent interest rate, only to face a rising cost of borrowing from each other (interbank lending rate), which  shot up amid strained liquidity.

Available records seen by Business247 News Online show that Standing Deposit Facility (SDF) declined week-on-week by 24.32 per cent to N113 billion while Standing Lending Facility (SLF) increased by 24.49 per cent to N881.53 billion.

Banks access the SLF to borrow from the CBN while they access the SDF to place deposit with the CBN. Business247 News Online noted that presently the CBN charges 14 per cent as interest rate on loans to banks through the SLF while it pays 7.0 percent as interest on deposit placement through the SDF.

Dealers from two major investment banking and securities houses in Lagos confirmed that there was no major inflow of funds into the system, just as aggregate system liquidity opened at about N93 billion on Monday.

The situation, they said, caused a rise in the amounts banks borrow from each other; Open Buy Back (OBB) and Overnight (O/N) funds to 27.3 per cent and 29.1 per cent on Tuesday, further surging 5.8 per cent and 6.4 per cent to 33.2 per cent and 35.5 per cent on Wednesday respectively.

Confirming the situation, dealers from Cowry Assets Management Limited said though the Central  Bank  auctioned  treasury bills  worth  N246.47  billion  via  Open  Market Operations (OMO), the  outflows  were  offset  by inflows in matured 195-day treasury bills worth N293.75 billion via the same OMO.

The dealers said the cash strain in the financial system may continue this week because the CBN will auction treasury bills worth N183.24 billion via primary market, which will comprise 91-day bills worth  N48.10  billion;  182-day  bills  worth  N48.45  billion; and  364-day  bills  worth  N86.68  billion.

The outflows they said will  outweigh maturing  treasury  bills worth N96.55  billion  via  primary market, comprising   91-day  bills worth N48.10  billion  and  182-day  bills worth N48.45  billion.  “Hence we anticipate increase in interbank interest rates resulting from expected strain in financial system liquidity,” stated Cowry Assets Management Limited.

A top executive of one of the new generation banks who spoke on condition of anonymity, told Business247 News Online that though the CBN had maintained strong tightening stance, the cash strain situation was unexpected, given that lenders had been depositing a daily average of N100.22 billion with the apex bank in recent past from excess liquidity to earn just 7 per cent interest.

This medium also recalled that latest CBN second quarter 2016 economic report indicated that total deposit by banks at the Standing Deposit Facility window during the review period was N6.012 trillion with a daily average of N100.22 billion, compared with N6. 614 trillion recorded in the first quarter of 2016.

The cost incurred by CBN which is the net interest earned by banks from placing their excess liquidity as deposit with the CBN in the past six months  to June, stood at N1.74 billion, compared with N1.08 billion, in the preceding quarter.

20 thoughts on “DMBs in short of funds as CBN bails out with N900bn

  • September 22, 2016 at 9:16 pm
    Permalink

    9/22/2016 at 17:16:33 Regards from danglekatangul

  • September 24, 2016 at 10:22 pm
    Permalink

    Appreciate the website– very easy to navigate and lots to explore!

  • September 27, 2016 at 12:16 pm
    Permalink

    Many thanks for the noteworthy website you’ve created at business247ng.com. Your enthusiasm is absolutely inspiring. Thanks again!

  • September 27, 2016 at 1:15 pm
    Permalink

    Your home is valueble for me. Thanks!…

  • September 30, 2016 at 12:15 am
    Permalink

    Appreciate business247ng.com– very easy to navigate and lots to see!

  • September 30, 2016 at 3:33 pm
    Permalink

    9/30/2016 @ 11:33:07 Appreciate the website– very informative and a lot of stuff to think about!

  • October 2, 2016 at 2:08 pm
    Permalink

    10/2/2016 @ 10:08:06 In my view, business247ng.com does a great job of covering subjects of this kind. While frequently intentionally controversial, the posts are in the main thoughtful and stimulating.

  • October 3, 2016 at 3:19 am
    Permalink

    10/2/2016 In my view, business247ng.com does a great job of dealing with issues of this kind. While sometimes intentionally polemic, the posts are more often than not well-written and stimulating.

  • October 5, 2016 at 11:27 am
    Permalink

    Good write-up, I am regular visitor of one’s website, maintain up the excellent operate, and It’s going to be a regular visitor for a lengthy time.

  • October 6, 2016 at 1:05 am
    Permalink

    10/5/2016 Appreciate business247ng.com– extremely informative and a lot of stuff to explore!

  • October 9, 2016 at 2:43 pm
    Permalink

    Appreciate the website– very informative and lots to think about!

  • October 11, 2016 at 9:54 am
    Permalink

    I enjoy, lead to I discovered exactly what I used to be taking a look for. You’ve ended my 4 day long hunt! God Bless you man. Have a nice day. Bye

  • October 15, 2016 at 1:40 pm
    Permalink

    Heya i am for the first time here. I found this board and I find It really useful & it helped me out a lot. I hope to give something back and aid others like you helped me.

  • October 19, 2016 at 3:23 pm
    Permalink

    Today, I went to the beach with my kids. I found a sea shell and gave it to my 4 year old daughter and said “You can hear the ocean if you put this to your ear.” She placed the shell to her ear and screamed. There was a hermit crab inside and it pinched her ear. She never wants to go back! LoL I know this is entirely off topic but I had to tell someone!

  • October 23, 2016 at 1:18 am
    Permalink

    Love the website– extremely user-friendly and lots to consider!

  • October 25, 2016 at 3:16 pm
    Permalink

    I completely agree with your take on this subject and look forward to upcoming posts and comments here at business247ng.com. Keep up the good work!

Comments are closed.