The Standing Lending Facility (SLF) window of the Central Bank of Nigeria (CBN) was full of activity in the first half of 2019, as banks borrowed a daily average of N95.63 billion in 121 days of transactions, during the period.
Compared to the first half of 2018, the average daily volume of SLF was N57.36 billion in 123 transaction days, of which Intraday Liquidity Facility (ILF) conversion constituted N45.54 billion or 79.39 per cent of the total request. Consequently, the average daily interest income was N44.40 million.
The banks’ frequency at the window in 2019 reflected the impact of the prevailing liquidity conditions in the banking system during the period, as the apex bank sustained its tight monetary stance in the defense of naira and to tame inflation.
CBN standing facilities were available at the discount window for banks to meet up with their liquidity obligations by either borrowing from the SLF or deposit their excess funds at the Standing Deposit Facilities (SDF) windows at the end of each business day.
The trend in 2019 showed more recourse to the SLF in the first half, when compared with the corresponding period of 2018.
The Intraday Liquidity Facility (ILF) conversion constituted N35.5 billion or 37.12 per cent out of the average daily volume of SLF at N95.63 billion, while average daily interest income amounted to N66.87 million and in excess of N8billion when multiplied by 121 days of transactions.
The applicable rates, which were anchored on the Monetary Policy Rates (14 per cent), for the SLF and SDF, at 16 per cent and nine per cent, from January to March 25, 2019, respectively.
However, the applicable rates changed to 15.50 and 8.50 per cent from March 26 to June 2019, due to MPR adjustments to 13.5 per cent.
Similarly, patronage at the SDF window reflected an average daily amount of N67.64 billion for the 121 business days in the first half of 2019, representing a decrease from N88.3 billion for the 123 business days in the corresponding period of 2018.
Similarly, the average daily interest payments on the deposits decreased to N22.48 million in the review period and cumulatively in excess of N2.7 billion, from daily interest payments N30.43 million in the corresponding period of 2018, which cumulatively was in excess of N3.7 billion.
The decreased volume of transactions reflected in the review period, according to CBN, was due to the tight liquidity conditions in the banking system.
Also within the period, total monthly average value of transactions at the inter-bank funds market stood at N1.21 trillion, showing a significant increase of N489.03 billion or 68.29 per cent over N716.06 billion in the corresponding period of 2018.
An analysis of the transactions also showed that the inter-bank market instrument- Open-Buy-Back (OBB) at N1.13 trillion, accounted for 93.74 per cent, while the unsecured inter-bank call took up 6.26 per cent or N75.48 billion. Conversely, in 2018, OBB accounted for N685.61 billion or 95.75 per cent, while the unsecured segment recorded N30.45 billion or 4.25 per cent. The preference for OBB transactions in the review period was attributable to risk aversion by market participants, as there was low appetite for unsecured lending in the market.