Nigerian Central Bank, Abuja Nigeria, N600bn liquidity may hit banks in 2 weeks

Nigerian Central Bank, Abuja Nigeria

 N600bn liquidity may hit banks in 2 weeks
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By Our Reporter  on October 20, 2015   Business
Stories by Blaise Udunze
There are expectations that liquidity of about N600 billion may hit the banking system within the next two weeks.
 This, according to a financial market dealer, was as a result of the banking system liquidity, which opened at over N1 trillion credit on Friday, driving down overnight lending rates to 0.5 per cent, with lenders not willing to deal at the low interbank rates.
 As a result of this, the 10-year Federal Government bonds yield, which had recorded 13.10 per cent, fell to 11-month low as excess liquidity in the banking system was funnelled into the bond market, traders said.
 Traders said most was being invested in fixed-income assets by commercial banks and pension funds, dariving yields lower. According to a foreign news wire service, yields on Nigerian bonds are expected to fall, dropping near a one year low with the interbank market awash with liquidity as the Central Bank of Nigeria (CBN) cash injections filter into the bond market.
 Traders said yields across maturities had dropped last week. The CBN injected N280 billion into the banking system from retired open market bills, increasing liquidity to over N1 trillion.
 The liquidity surge has gone on for over three weeks, with the CBN unwilling to issue new open market bills to mop up the funds, wanting banks to lend to businesses.
“Markets will continue to be awash with liquidity (but) this is not long-term funds for lending until banks know what the central bank wants to do,” one trader said.
 The central bank has kept its benchmark lending rate at 13 per cent, but lowered its cash reserve requirement to 25 per cent from 31 per cent, seeking to get lending flowing in the economy after lower oil prices hit the currency.
 Meanwhile, investment research and advisory firm, Afrinvest, explained that the liquidity condition stayed upbeat but gradually moderated to N756.4 billion, as the Open Buy Back (OBB) and Overnight (O/N) firmed at 0.8 per cent and 1 per cent in that order.
 According to the firm, with the inflow of N283.7 billion in OMO repayment last Thursday, liquidity level improved to N1 trillion, while the OBB and O/N remained stable at Wednesday level.
 At the close of trade on Friday, Afrinvest stated that the average liquidity level closed at N986 billion while the average OBB and O/N rates settled at 0.8 per cent and 1.1 per cent accordingly.