CBN brought down cost of liquidity management by N617.230bn in H1, 2020

THE Central  Bank of Nigeria (CBN) says the cost of liquidity management in the first six months of 2020 reduced to N671.26 billion compared to N1,288.49 billion in the corresponding period of 2019. This represents a cost reduction to the tune of N617.230billion and attributable to the bank’s deliberate efforts to promote real sector lending by Deposit Money Banks (DMBs) leading to the reduction in amount auctioned.

In its 2020 financial markets activities report released last week, the apex banking sector regulator said the tenors of Open Market Operation (OMO) auction ranged from 64 to 364 days, at stop rates between 4.9500 and 13.2800 per cent.

In the corresponding period of 2019, the tenors were 27 to 364 days, at stop rates ranging from 11.0500 to 15.0000 per cent.

CBN Bills offered at the auctions amounted to N6,387.76 billion, while total subscription and sales amounted to N8,567.22 billion and N6,453.88 billion, respectively, compared with N11,851.66 billion, N13,054.35 billion and N11,827.66 billion, offered, subscribed and sold, respectively, in the corresponding period of 2019.

Signed by the duo of Dr. Kingsley Obiora, Deputy Governor, Economic Policy and Angela Sere-Ejembi Director, Financial Markets Department of the CBN, the report stated that total request for repurchase (repo) transactions for the first half of 2020 amounted to N661.03 billion, while the applicable interest rates ranged from 18.00 to 19.00 per cent for the 4- to 90-day tenors, from January to May 27, 2020, and 17.00 to 18.00 per cent from May 28 to June 2020. Consequently, total interest earned on repo was N10.75 billion.

It further stated that  in the corresponding period of 2019, request for repo amounted to N611.30 billion, while interest earned was N19.25 billion at 18.50 to 19.50 per cent from January to March 25, 2019 and 18.00 to 19.00 per cent from March 26 to June 2019 for the same tenors.

Merchant and Deposit Money Banks (DMBs) patronized the bank’s discount window for the standing facilities to square-up their positions by borrowing from the Standing Lending Facilities (SLF) or depositing excess funds at the Standing Deposit Facilities (SDF) window at the end of each business day. The trend at the window, according to CBN, showed a lower recourse to the SLF in the first half of 2020, than the corresponding period of 2019. Meanwhile, the threshold for daily deposits per institution at the SDF remained at N2 billion, in line with the policy thrust to encourage real sector lending.

The applicable rates, for the SLF and SDF, was 15.50 and 8.50 per cent, from January to May 27, 2020, respectively; and 14.50 and 7.50 percent from May 28 to end-June 2020.

In the first half of 2019, the applicable rates for SLF and SDF, was 16.00 and 9.00 per cent, from January to March 25, 2019, respectively; and 15.50 and 8.50 per cent from March 26 to end-June 2019. The rates are anchored to the Monetary Policy Rates (MPR).

In the period under review, the average daily request for SLF was N34.14 billion in 95 days, out of which ILF conversion was N12.89 billion or 37.76 per cent of total requests.

The average daily interest earned was N0.21 billion. In the corresponding period of 2019, the average daily request for SLF was N98.65 billion in 121 days, out of which intraday lending facilities (ILF) conversion was N35.50 billion or 35.98 per cent, while average daily interest earned was N0.67 billion. The higher patronage at the window in 2019 reflected tighter liquidity conditions, the report noted.

At the inter-bank funds market, the total monthly average value of transactions increased by 20.59 per cent to N1,453.24 billion in the first half of 2020 from N1,205.09 billion in the first half of 2019.

It stated that Open Buy Back (OBB) transactions accounted for 94.81 per cent of the total value of inter-bank deals, while transactions at the unsecured interbank segment accounted for the balance of 5.19 per cent, compared with 93.74 and 6.26 per cent, respectively in 2019.


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