Banks besieged the Central Bank of Nigeria (CBN) for loans in response to intense scarcity of funds, as volume of idle cash (liquidity) in the interbank money market plunged by 2,183 per cent last week.
Data from the CBN shows that interbank money market liquidity opening level crashed to N12 billion on Friday from N349.6 billion on Friday the previous week.
Consequently, banks borrowing from the CBN jumped by 2,500 per cent to N489 billion last week from N19.2 billion the previous week.
On the contrary, banks’ deposits with the apex bank fell sharply by 67 per cent to N25.4 billion last week from N73.6 billion the previous week.
Further analysis showed that 86 per cent or N420 billion of banks’ borrowing from the apex bank were repurchase agreement (repo) while the remaining 14 per cent or N69 billion was through the Standing Lending Facility (SLF) of the apex bank.
A repurchase agreement (repo) is a short-term borrowing, where the banks sell their government securities (treasury bills) to the apex bank usually on an overnight basis, and buy them back the following day at a slightly higher price.
Also reflecting the severity of the scarcity of funds, cost of funds remained elevated throughout the week, with the interest rate on Overnight lending rising by 3.6 percentage points to 17.25 per cent from 13.7 per cent on Monday.
