Money market rates were generally stable and moved in tandem with the level of liquidity in the system in the month of July.
Provisional data from the Central Bank of Nigeria (CBN)’s economic report for the month of July indicated that movements in banks’ deposit rates were mixed, while lending rates generally trended upwards in July 2019.
With the exception of the 6-month, 12-month and over 12-month deposit rates, which rose to 10.31 per cent, 10.42 per cent and 9.78 per cent, respectively, from its preceding month’s levels of 10.24 per cent, 10.36 per cent and 9.72 per cent, all other rates of various maturities, fell from a range of 3.64 per cent – 9.24 per cent in the preceding month to a range of 3.58 per cent – 9.19 per cent in July 2019.
The weighted average prime and maximum lending rates rose by 0.61 percentage point and 0.08 percentage point to 16.82 per cent and 30.94 per cent, respectively, in July 2019.
Consequently, the spread between the average term deposit and the maximum lending rates widened by 0.12 percentage point to 22.24 percentage points at end-July 2019. Similarly, the spread between the average savings deposit and maximum lending rates widened by 0.11 percentage point to 27.01percentage points at the end of July 2019.
The average inter-bank rate, which stood at 8.38 per cent at the end of June 2019, rose by 0.79 percentage point to 9.17 percent at end-July 2019. The Open-buy-back (OBB) rate, which stood at 8.71 per cent in the preceding month, rose by 2.36 percentage points to 11.07 per cent at end-July 2019.
Similarly, the Nigerian inter-bank offered rate (NIBOR), for the 30-day tenor, fell to 11.93 per cent in the review period, compared with 12.10 per cent at end-June 2019. With headline inflation estimated at 11.13 per cent in July 2019, all deposit rates remained negative in real terms, while lending rates were positive in real terms.
During the review period, major financial market indicators remained relatively stable due to efficient liquidity management strategy of the Bank in both the domestic and foreign exchange markets.
The net liquidity position and interest rates in the economy reflected the impact of liquidity injections and the Bank’s liquidity management operations.
Movements in domestic money market rates were influenced, largely, by the level of liquidity which was triggered, mainly, by inflow through fiscal disbursements, maturing CBN securities and Federal Government of Nigeria (FGN) securities, as well as, outflow arising from provisioning and market participants continued access to the Bank’s discount window.
The total value of money market assets outstanding in July 2019 was N12.39 billion, showing an increase of 1.2 per cent, in contrast to the decline of 1.9 per cent in the preceding month.
The development was attributed to the 4.0 per cent and 17.2 per cent increase in the FGN Bonds and Commercial Paper outstanding, respectively.
Deposits of banks and the private sector with the CBN, on month-on-month basis, rose, while deposits of the Federal Government with the CBN fell, relative to the levels at the end of the preceding month. Overall, aggregate deposit at the CBN declined by 0.5 per cent to N16,013.52 billion at the end of June 2019. Of the total deposits at the CBN, the shares of the Federal Government, banks and the private sector were 42.9 per cent, 37.9 per cent and 19.2 per cent, respectively.
HOPE MOSES-ASHIKE
