Banks’ credit to the domestic economy increased slightly by 0.6 per cent to N21.074 trillion at the end of June 2019, compared with the level at the end of the preceding month, data provided by the Central Bank of Nigeria (CBN) has revealed.
The central bank disclosed this in its monthly economic report for July 2019, obtained recently.
The development was attributed to the rise in claims on the federal government.
Also, the report showed that total assets and liabilities of the banks amounted to N39.623 trillion at the end of 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 the central bank.
The funds were used mainly, to acquire foreign assets, shore up capital accounts and pay off demand deposits.
According to the report, the total specified liquid assets of banks stood at N13.880 trillion at the end of June 2019, representing 59.7 per cent of their total current liabilities.
“At that level, the liquidity ratio was 1.5 percentage point below the level at the end of the preceding month but was 29.7 percentage points above the stipulated minimum liquidity ratio of 30 per cent. “The loans-to-deposit ratio, at 57.64 per cent, was 0.3 percentage point higher, compared with the level at the end of the preceding month and was lower than the maximum ratio of 80 per cent by 22.4 percentage points,” the report stated.
In terms of money market developments, during the review period, major financial market indicators remained relatively stable, “due to efficient liquidity management strategy of the Bank in both the domestic and foreign exchange markets.”
It stated that the net liquidity position and interest rates in the economy reflected the impact of liquidity injections and the Bank’s liquidity management operations. Also, movements in domestic money market rates were influenced, largely, by the level of liquidity which was triggered, mainly, by inflow through fiscal disbursements, maturing CBN securities and Federal Government of Nigeria (FGN) securities, as well as, outflow arising from provisioning and market participants continued access to the Bank’s discount window.
In all, the total value of money market assets outstanding on July 2019, was N12.39 billion, showing an increase of 1.2 per cent, in contrast to the decline of 1.9 per cent in the preceding month.
The development was attributed to the four per cent and 17.2 per cent increase in the FGN Bonds and Commercial Paper outstanding, respectively.
“Money market rates were generally stable and moved in tandem with the level of liquidity in the review period. Provisional data indicated that movements in banks’ deposit rates were mixed, while lending rates generally trended upwards in July 2019.
“With the exception of the 6-month, 12-month and over 12-month deposit rates, which rose to 10.31 per cent, 10.42 per cent and 9.78 per cent, respectively, from its preceding month’s levels of 10.24 per cent, 10.36 per cent and 9.72 per cent, all other rates of various maturities, fell from a range of 3.64 per cent – 9.24 per cent in the preceding month to a range of 3.58 per cent – 9.19 per cent in July 2019.
“The weighted average prime and maximum lending rates rose by 0.61 percentage point and 0.08 percentage point to 16.82 per cent and 30.94 per cent, respectively, on July 2019. “Consequently, the spread between the average term deposit and the maximum lending rates widened by 0.12 percentage point to 22.24 percentage points at end-July 2019.
“Similarly, the spread between the average savings deposit and maximum lending rates widened by 0.11 percentage point to 27.01percentage points at end-July 2019,” it added.
According to the report, the average inter-bank rate, which stood at 8.38 per cent at end-June 2019, rose by 0.79 percentage point to 9.17 per cent at end-July 2019. The Open-buy-back (OBB) rate, which stood at 8.71 per cent in the preceding month, rose by 2.36 percentage points to 11.07 per cent at end-July 2019.
Similarly, the Nigerian inter-bank offered rate (NIBOR), for the 30-day tenor, fell to 11.93 per cent in the review period, compared with 12.10 per cent at end-June 2019. With headline inflation estimated at 11.13 per cent in July 2019, all deposit rates remained negative in real terms, while lending rates were positive in real terms.
Furthermore, it revealed that Commercial Paper (CP) outstanding held by commercial banks stood at N41.20 billion at the end of the review month, showing an increase of 17.2 per cent, compared with N35.15 billion recorded in the month of June 2019.
Thus, CP constituted 0.3 per cent of the total value of money market assets outstanding in the review period, the same as in the preceding month.