IMF warns as CBN loans to banks in three months stood at N2.4tr

International Monetary Fund (IMF) has cautioned against rising risks in the banking sector which has compelled banks to borrow a total of N2.496 trillion from Central Bank of Nigeria (CBN) in the last three months of 2017.

This is according to data obtained from the apex bank which also revealed that the inter-bank fund’s segment, weighted average interbank call rate, which stood at 18.45 per cent at end September 2017, rose by 5.57 per cent to 24.02 per cent in the fourth quarter of 2017.

The development reflected the relative liquidity squeeze in the banking system in the review quarter.

IMF directors said in their advisory to CBN that rising banking sector risks should be contained even as they welcomed CBN’s commitment to helping increase capital buffers by stopping dividend payments by weak banks, they called for an asset quality review to identify any potential capital need.

The directors “noted that an enhanced risk-based banking supervision, strict enforcement of prudential requirements, and a revamped resolution framework would help contain risks.”

CBN put total standing deposit facility (SDF) granted during the review quarter was N2,494.06 billion with a daily average of N45.00 billion, compared with N1,536.76 billion in the preceding quarter.

“Total request for Standing Lending Facility (SLF) (including the Intra-day lending facilities (ILF) converted to overnight repo) amounted to N11,733.72 billion, made up of N7,266.11 billion direct SLF and N4,467.61 billion ILF converted to the overnight repo.

“Daily average for the 59 transaction days (October 1 –December 27, 2017) was N198.88 billion, with daily request ranging from N67.35 billion to N383.53 billion.”

“Total interest earned was N8.04 billion. SLF was at its peak on October 10, 2017, due to consistent mop-up activity through OMO.

“Interest payment on SDF in the review quarter was N0.89 billion, compared with N0.52 billion, at end-September 2017.”

As a way of shoring up their liquidity base, the apex bank recently directed banks with high non-performing loans (NPLs) not pay a dividend to shareholders.