Nigerian banks in one month’s activity hive
– Assets, liabilities top N41tr, credit settles at N22 trillion
– Deposit-lending interest rates’ gap still wide
The nation’s Deposit Money Banks (DMBs) recorded a significant increase in assets and liabilities N1.82 trillion, which represented a 4.6 per cent rise in just one month.
Thus, the total assets and liabilities of the commercial banks amounted to N41.43 trillion at the end of October 2019, compared with N39.61 trillion at the end of the month of September.
An analysis of the November 2019 Economic Report of the Central Bank of Nigeria (CBN) showed that the financial institutions made more inroads in the mobilisation of funds for onward lending.
Contrastingly, total assets and liabilities of commercial banks at N39.61 trillion at the end of September 2019, showed 0.1 per cent increase, compared with the level at the end of the preceding month.
Funds were sourced, mainly, from the sale of foreign assets, credit from the bank and the realisation of claims on the Federal Government.
These funds, then, were used, mainly, to increase claims on the private sector, reduce unclassified liabilities and shore up capital.
But in October, Funds were mainly sourced from an increase in unclassified liabilities, and the mobilisation of time, savings and foreign currency deposits.
However, the funds were also used, mainly, to acquire unclassified assets, foreign assets and to boost reserves.
Credit expansion
Similarly, commercial banks’ aggregate credit exposure to the domestic economy rose by 0.6 per cent to N22.26 trillion at the end of October 2019, compared with the level at the end of the preceding month.
The development, which showed an increase of N133.56 billion credit expansion, was attributed to the rise in the banking industry’s claims on the private sector.
In September 2019, the commercial banks’ credit to the domestic economy had risen by 1.4 per cent to about N22.1 trillion, which was attributed to the rise in its claims on the private sector component.
Total specified liquid assets of banks stood at N14.27 trillion at the end of the period under review (October 2019), representing 59.3 per cent of their total current liabilities.
At that level, the liquidity ratio was 0.9 percentage point lower than the level at the end of the preceding month (September), and was 29.30 percentage points above the stipulated minimum liquidity ratio of 30 per cent.
The loan-to-deposit ratio, at 61.9 per cent, was 0.3 percentage point below the level at the end of the preceding month and was lower than the maximum ratio of 80 per cent by 18.10 percentage points.
Besides, it was also below the CBN directive that all banks must meet a minimum of 65 per cent loan exposure of their total deposits, showing that some banks, during the period, fell short of the required credit expansion.
SLF, SDF review
Still, the commercial banks and the merchant banks continued to access the Standing Facilities window of the apex bank to square-up their financial positions in November 2019.
The trend at the CBN standing facilities window showed a decline at the Standing Lending Facility (SLF) window, against the increased patronage at the Standing Deposit Facility (SDF) window.
The SLF is the facility window for bank’s to borrow from the apex bank, while the SDF is where they deposit their excess funds to CBN in return for adjusted interest rate. Applicable rates for the SLF and SDF remained at 15.5 and 8.5 per cent, respectively.
The total SLF granted, during the review period, was N662.44 billion, made up of N490.29 billion direct SLF and N172.15 billion Intraday Lending Facilities (ILF) converted to overnight repo.
The daily average of SLF was N41.4 billion in the 16 transaction days from November 1 – 26, 2019, while daily requests ranged from N480 million to N126.74 billion.
Consequently, the total interest earnings by the apex bank amounted to N370 million.
In October 2019, total SLF granted was N319.28 billion, made up of N227.68 billion direct SLF and N91.60 billion ILF converted to the overnight repo.
Daily average was N17.74 billion in the 18 transaction days from October 1 – 25, 2019, while requests ranged from N420 million to N148.96 billion and total interest earned amounted to N180 million.
On the other hand, total SDF granted by commercial banks during the review period under review was N443.63 billion with a daily average of N26.09 billion in the 17 transaction days from November 1- 26, 2019.
The daily deposits ranged from N6.3 billion to N42.75 billion, while the cost incurred on SDF by the apex bank in the month stood at N16 million.
Comparing the October activities, total SDF granted was N545.71 billion with a daily average of N30.32 billion in the 18 transaction days from October 1- 25, 2019.
Daily request ranged from N6.90 billion to N43.90 billion, while the cost incurred by CBN on SDF in the month stood at N180 million.
Money instruments
Commercial paper (CP) outstanding held by commercial banks stood at N35.28 billion at the end of the review month, showing a decrease of 5.9 per cent, compared with N37.49 billion recorded in the month of October 2019.
Thus, CP constituted 0.30 per cent of the total value of money market assets outstanding in the review period, the same as the level at the end of the preceding month.
The level of contribution of CPs shows that it is still a developing market instrument, with potential of taking a larger market share as confidence improves and strong institutions with verifiable fundamentals participate.
Bankers’ Acceptances (BAs), at the end of November 2019, stood at N5.84 billion, representing a decrease of 1.4 per cent, relative to the level at the end of the preceding month.
Consequently, BAs accounted for 0.05 per cent of the total value of money market assets outstanding at the end of the review period.
In October 2019, BAs stood at N1.59 billion, representing an increase of 9.7 per cent and accounted for 0.01 per cent of the total value of money market assets outstanding at the end of the review period.
Rates’ influencers
During the review period, key financial market indicators remained relatively stable, as movements in domestic money market rates were influenced, largely, by the level of liquidity arising from inflows.
These inflows included fiscal disbursements, maturing CBN bills and outflow from the sale of CBN bills, FGN securities and provisioning settlement for foreign exchange purchases.
The stability at the foreign exchange market was attributed to the sustained intervention by the CBN.
In line with the bank’s tight monetary policy stance, excess liquidity, arising from maturing CBN bills and fiscal injections, was consistently mopped up through Open Market Operations (OMO) auctions.
The impact of the new CBN directive on OMO auctions, had seen portfolio switch from the money market to the capital market, leading to a crash in treasury bill rates.
Banks’ rate charges
Money market rates, although far from the expectations and clamours of the real sector operators, were generally stable and movement was in tandem with the level of liquidity in the review period.
First, the short-term money market rates, like the inter-bank lending instruments, traded below the benchmark interest rate of 13.50 per cent in the major parts of the review period.
But provisional data indicated that movements in banks’ deposit rates were mixed, while lending rates trended upwards in November 2019.
With the exception of the average savings and the seven-day deposit rates, which fell by 0.4 per cent and 0.02 per cent below their respective levels in the preceding month, all other deposit rates of various maturities, rose from a range of 8.06 – 9.95 per cent in October to a range of 8.14 – 10.13 per cent in November 2019.
The weighted average prime lending and maximum lending rates rose by 0.04 percentage point and 0.44 percentage point to 15.11 per cent and 31 per cent respectively, in November 2019.
Consequently, the spread between the average term deposit and the maximum lending rates widened by 0.4 percentage point to 22.72 percentage points at the end of November 2019.
Similarly, the spread between the average savings deposit and maximum lending rates widened by 0.8 percentage point to 27.43 percentage points at end-November 2019.
The Open-buy-back (OBB) rate, which stood at 6.64 per cent in the preceding month, rose by 0.8 percentage point to 7.44 per cent at the end of November 2019.
Similarly, the Nigeria inter-bank offered rate (NIBOR), for the 30-day tenor, rose to 12.91 per cent in the review period, compared with 12.46 per cent at the end of October 2019.
With headline inflation at 11.85 per cent in November 2019, all deposit rates remained negative in real terms, while lending rates were positive in real terms.
