MONEY MARKET
Deposit Money Banks’ reliance on the loans from the Central Bank of Nigeria (CBN) fell sharply by 93 percent in August, driven by surge in idle cash (excess liquidity) in the interbank money market. Also reflecting the excess liquidity in the system, banks’ deposit of idle cash with the CBN rose by 19 percent in the same period.
The CBN disclosed these in its monthly economic report for July and August 2020. READ ALSO:Kwara gov hails Owolewa’s victory in US polls Banks borrow from the CBN through the Standing Lending Facility (SLF) while they place deposit with the apex bank through the Standing Deposit Facility (SDF). According to the CBN’s report, banks’ borrowing through the SLF was N112.73 billion in August down from N1.57 trillion in July, translating to 93 percent decline.
However, banks’ deposit placement through the SDF rose to N441.65 billion in August from N370.92 billion in July, translating to 19 percent increase. The CBN’s economic report stated: “Deposit Money Banks (DMBs) and merchant banks continued to access the Standing Facilities window to square liquidity positions in August 2020. “The trend at the CBN standing facilities window showed more frequency at the Standing Deposit Facility (SDF) window, due to improved liquidity in the banking system.
“Banks took advantage of the situation to scale up operations in the face of the COVID-19 pandemic. Applicable rates for the SLF and Standing Deposit Facility (SDF) remained at 14.5 per cent and 7.5 per cent, respectively. “The total request for the SLF granted, in August 2020, was N112.73 billion, made up of N83.30 billion direct SLF and N29.43 billion Intraday Lending Facilities (ILF) converted to overnight repo.
The daily average was N9.39 billion in 12 transaction days from August 3 to 25, 2020. “Total interest earned at 14.5 per cent was N0.06 billion. “The total SDF granted, during the review period, was N441.65 billion with a daily average of N25.98 billion in 17 transaction days from August 3 to 25, 2020. Daily requests ranged from N6.00 billion to N41.40 billion. The cost incurred on SDF in the month stood at N0.12 billion.”
– Vanguard