Commercial banks credit to domestic economy drops by 5.5 per cent

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cbn

… Borrows N11.7trn from CBN

…generates N8.04bn interest income

By Kayode Tokede

Due to consistent mop up activity through Open Market Operation (OMO), commercial banks borrowing from the Central Bank of Nigeria (CBN) increased to N11.7 trillion in fourth quarter of 2017.

The CBN’s economic report in fourth quarter of 2017 that released on Thursday shows that borrowing made up of N7.27 trillion direct Standing Lending Facility(SLF) and N4.4 trillion Intra-day Lending Facilities (ILF) converted to overnight repo.

According to the report, “Total request for SLF (including the ILF converted to overnight repo) amounted to N11,733.72 billion, made up of N7,266.11 billion direct SLF and N4,467.61 billion ILF converted to overnight repo.

“Daily average for the 59 transaction days (October 1 – December 27, 2017) was N198.88 billion, with daily request ranging from N67.35 billion to N383.53 billion.”

For frequent borrowing from the CBN by commercial banks, the regulator recorded N8.04 billion as interest income in fourth quarter of 2017

The report by CBN stated that, “Total interest earned was N8.04 billion. SLF was at its peak on October 10, 2017 due to consistent mop up activity through OMO.”

Although some of the lenders kept their excess cash at CBN’s Standing Deposit Facility (SDF) within the period under review, others, including merchant banks continued to access the SLF.

By the subsisting decision of the Monetary Policy Committee, applicable rates for SLF and SDF remained at 16 per cent and nine per cent, respectively.

Meanwhile, a total of N1.49 billion was guaranteed to 10.259 farmers under the Agricultural Credit Guarantee Scheme (ACGS) in the period under review.

The report stated that, “a total N1,487.0 million was guaranteed to 10,259 farmers under the ACGS in the fourth quarter of 2017. This represented 11.4 per cent increase above the level in the third quarter of 2017, but was 36.0 per cent lower than the level in the corresponding period of 2016.

“Sub-sectoral analysis showed that food crops obtained the largest share of N991.9 million (66.7 per cent) guaranteed to 7,254 beneficiaries, followed by livestock sub-sector which got N167.5 million (11.3 per cent) guaranteed to 661 beneficiaries, while cash crop sub-sector got N123.7 million (8.3 per cent) guaranteed to 725 beneficiaries.

“The fisheries sub-sector received N82.7 million (5.5 per cent) guaranteed to 299 beneficiaries, mixed crops sub-sector had N76.9 million (5.2 per cent) guaranteed to 967 beneficiaries while a total of N44.4 million (3.0 per cent) was guaranteed to 353 beneficiaries in the „Others? sub-sectors.

Analysis by state shows that 31 states and the Federal Capital Territory benefited from the Scheme in the review period. The highest and lowest sums of N213.4 million (14.4 per cent) and N1.1 million (0.7 per cent) were guaranteed to Jigawa and Zamfara States, respectively.

Under the Commercial Agriculture Credit Scheme (CACS), the economic report by CBN shows that, “At end-December 2017, total amount released by the CBN under the CACS from inception to the participating banks for disbursement stood at N551.18 billion for 547 projects.

“The projects included 65 state government projects under CACS and eight Paddy Aggragate Sheme (PAS).”

The N551.18 billion breakdown reveals that Zenith Bank Plc leads 20 commercial disbursed amount followed by Sterling bank Plc and United Bank for Africa Plc (UBA)

Zenith Bank in 2017 disbursed N114.65 billion to 72 projects while Sterling Bank and UBA disbursed N68.61 billion and N67.06 billion respectively.

According to CBN economy report, the total assets and liabilities of the commercial banks stood at N34,593.88 billion at end-December 2017, representing 3.9 per cent increase over the level at end-September 2017.

“The funds were sourced, mainly, from reduction of claims on the Federal Government and mobilisation of demand, time, savings and foreign currency deposits. The funds were used to increase claims on the central bank and the private sector, acquire foreign assets, increase accretion to reserves and reduce unclassified liabilities.

“At N20,414.45 billion, banks? credit to the domestic economy, fell by 5.5 per cent, below the level at end-September 2017.

“The development reflected, the decline in claims on the Federal Government and the private sector in the review quarter.

“Total specified liquid assets of the banks stood at N10,093.68 billion, representing 54.8 per cent of the total current liabilities. At that level, the liquidity ratio rose by 4.9 percentage points above the level at the end of the preceding quarter and was 24.8 percentage points above the stipulated minimum ratio of 30.0 per cent. The loans-to-deposit ratio, at 72.84 per cent, was 6.77 percentage points and 7.16 percentage points below the level at the end of the preceding quarter and the prescribed maximum of 80 per cent,” the report explained.

The report stated that Treasury Bills of 91- 182- and 364-day tenors, amounting to N602.11 billion, N1,161.60 billion and N602.11 billion were offered, subscribed to and allotted, respectively, in the fourth quarter of 2017.

“Auctions were held as scheduled in October and November, while full refunds were made for investmnets due in December as directed by the DMO.

The Bank intervened through direct Open Market Operations (OMO) auctions conducted during the review quarter.

“The tenors-to-maturity of the instruments ranged from 72- to 365- day period. Total amount offered was N4,997.36 billion, while total subscription and allotment were N3,532.99 billion and N3,399.69 billion, respectively. The bid rates ranged from 12.9000 to 17.9500 per cent, while the stop rates ranged from 12.9000 to 17.9300 per cent. Repayment of matured CBN bills was N3,042.17 billion, translating to a net withdrawal of N357.52 billion,” the report explained.

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