BANKING LIQUIDITY SURGES TO OVER N1 TRILLION AMID MARKET OPTIMISM
Liquidity in Nigeria’s banking sector has seen a sharp increase, rising by 62.4% to reach N1.2 trillion, according to a report by Afrinvest. This surge is attributed to significant inflows from the Central Bank of Nigeria’s Standing Lending Facility (SLF), which accounted for N2.8 trillion, and the maturity of treasury bills worth N402.2 billion.
Afrinvest’s report explained that these inflows outpaced withdrawals from the Standing Deposit Facility (SDF), which amounted to N566 billion. The liquidity in the banking system refers to the amount of cash and liquid assets available in the financial sector, determining how much money is available for lending and investment by banks.
The SLF is a facility provided by the central bank, allowing commercial banks to borrow short-term funds to manage liquidity, while the SDF allows banks to deposit excess reserves with the central bank in exchange for interest.
As a result of increased liquidity, the overnight policy rate and overnight negotiated rate fell, closing the week at 29.70% and 29.97%, respectively. This is a decline from the previous week’s rates of 31.20% and 31.73%.
Furthermore, the bond market exhibited bullish sentiment, with strong buying interest across most trading sessions. The average yield on domestic bonds dropped by 16 basis points to 18.4%. Short-term bonds saw the most interest, with yields decreasing by 33 basis points, while mid- and long-term bonds also recorded declines in yields of 24 and 2 basis points, respectively.
The combined effect of improved banking liquidity and positive market sentiment suggests favorable conditions for investors in both money and bond markets.
Afrinvest also highlighted that banks and discount houses borrowed N3 trillion from the CBN via the SLF in the previous week, while they deposited N493.6 billion through the SDF, resulting in a 4.7% increase in overall system liquidity.
This influx of liquidity is seen as a positive signal for the Nigerian financial markets, creating opportunities for banks and investors to engage more actively in lending and investing.
Liquidity in Nigeria’s banking sector has seen a sharp increase, rising by 62.4% to reach N1.2 trillion, according to a report by Afrinvest. This surge is attributed to significant inflows from the Central Bank of Nigeria’s Standing Lending Facility (SLF), which accounted for N2.8 trillion, and the maturity of treasury bills worth N402.2 billion.
Afrinvest’s report explained that these inflows outpaced withdrawals from the Standing Deposit Facility (SDF), which amounted to N566 billion. The liquidity in the banking system refers to the amount of cash and liquid assets available in the financial sector, determining how much money is available for lending and investment by banks.
The SLF is a facility provided by the central bank, allowing commercial banks to borrow short-term funds to manage liquidity, while the SDF allows banks to deposit excess reserves with the central bank in exchange for interest.
As a result of increased liquidity, the overnight policy rate and overnight negotiated rate fell, closing the week at 29.70% and 29.97%, respectively. This is a decline from the previous week’s rates of 31.20% and 31.73%.
Furthermore, the bond market exhibited bullish sentiment, with strong buying interest across most trading sessions. The average yield on domestic bonds dropped by 16 basis points to 18.4%. Short-term bonds saw the most interest, with yields decreasing by 33 basis points, while mid- and long-term bonds also recorded declines in yields of 24 and 2 basis points, respectively.
The combined effect of improved banking liquidity and positive market sentiment suggests favorable conditions for investors in both money and bond markets.
Afrinvest also highlighted that banks and discount houses borrowed N3 trillion from the CBN via the SLF in the previous week, while they deposited N493.6 billion through the SDF, resulting in a 4.7% increase in overall system liquidity.
This influx of liquidity is seen as a positive signal for the Nigerian financial markets, creating opportunities for banks and investors to engage more actively in lending and investing.