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An inflow from Open Market Operation (OMO) maturities worth N105.2 billion is expected to bolster banking system liquidity this week.
This will be in addition to the current system liquidity of about N840.0 billion as at Friday last week, making a total of N945.2 billion.
“We expect to see a sustenance in the bullish run stemming from a strong system liquidity as well as sustained OMO auction by the Central Bank of Nigeria (CBN)”, analysts at Afrinvest Securities limited said.
Excess liquidity in the system, arising, mainly, from matured CBN bills and fiscal injections were consistently mopped-up through OMO auctions. Consequently, major money market rates trended in tandem with the level of liquidity in the system.
The CBN’s economic report for the month of May 2019 revealed that the total value of money market assets outstanding in May 2019 was N12.49 billion, showing an increase of 0.9 per cent, compared with 4.1 per cent increase in the preceding month.
The development was attributed, largely, to the 16.0 per cent, 2.9 per cent and 1.2 per cent increase in Bankers Acceptances, Commercial Paper and FGN Bonds outstanding, respectively.
Money market rates were generally stable and moved in tandem with the level of liquidity in the review period.
Provisional data from the report indicated that movements in banks’ deposit rates were mixed, while lending rates trended downwards in May 2019. With the exception of the 6-month and 12-month deposit rates, which declined to 10.26 per cent and 10.56 per cent, respectively, from its preceding month’s levels of 10.36 per cent and 10.70 per cent, all other rates of various maturities, rose from a range of 3.70 per cent – 9.71 per cent in the preceding month to a range of 3.71 per cent – 9.82 per cent in May 2019.
The weighted average prime and maximum lending rates fell by 2.28 percentage points and 0.1 percentage point to 16.64 per cent and 30.76 per cent, respectively, in May 2019.
Consequently, the spread between the average term deposit and the maximum lending rates narrowed by 0.21 percentage point to 21.97 percentage points at end-May 2019.
Similarly, the spread between the average savings deposit and maximum lending rates narrowed by 0.20 percentage point to 26.78 percentage points at the end of May 2019.
The average inter-bank rate, which stood at 13.98 per cent at end-April 2019, fell by 8.84 percentage points to 5.14 percent at the end of May 2019. The Open-buy-back (OBB) rate, which stood at 16.15 per cent in the preceding month, fell by 7.81 percentage points to 8.34 per cent at the end of May 2019.
Similarly, the Nigerian inter-bank offered rate (NIBOR), for the 30-day tenor, fell to 11.62 per cent in the review period, compared with 12.08 per cent at the end of April 2019. With headline inflation at 11.40 per cent in May 2019, all deposit rates remained negative in real terms, while lending rates were positive in real terms.
The report showed that Aggregate credit to the domestic economy (net), on monthon-month basis, grew by 3.7 per cent to N32,898.5 billion at the end of April 2019, compared with 4.0 per cent growth at the end of the preceding month. It, however, contrasted with 0.1 per cent decline at the end of the corresponding period of 2018.
The development showed an increase of 3.4 per cent and 3.8 per cent in net claims on the Federal Government and claims on the private sector, respectively. Relative to the level at end-December 2018, aggregate credit to the domestic economy (net) rose by 19.3 per cent, compared with the growth of 15.1 per cent and 5.1 per cent at the end of the preceding month and the corresponding period of 2018, respectively.
The increase in aggregate credit to the domestic economy (net) was as a result of 64.4 per cent and 9.6 per cent rise in net claims on the Federal Government and claims on the private sector, respectively.