There are palpable fears that the policy stance of the Central Bank of Nigeria (CBN) on defending the naira against economic growth may cripple the economy sooner than later as inter-bank rates hit 44  percent.
The Nigerian Interbank Offered Rates (NIBOR), the rate at which banks lend money to one another climbed further to an average of 44 percent from 28 percent Monday.
The central bank has withdrawn much money from the system in its attempt to stabilize the naira. At other times, it also withdraws  money through treasury bills and other windows.
Data obtained from the Financial Market Dealers Association (FMDA) indicates that the Call (Overnight) tenor increased to 44.67 per cent yesterday, from 25.83 per cent on Monday, the 7-day tenor also jumped to 43.12 per cent yesterday, from 24.12 the previous day.
A research note from the Renaissance Capital Limited (RenCap) pointed out that the development in the market could be as a result of the delayed impact of the increase in the CRR for public sector deposits.
The decision by the central bank to sterilise 50 per cent of public sector deposits in Deposit Money Banks (DMBs) had exposed the shallowness and fragility of the banking system. The monetary policy, which was announced at the July Monetary Policy Committee (MPC), also revealed the vulnerability of the banking system’s dependence on government deposits.
Nevertheless, the situation in the banking industry might even be worsened as there are indications that the Asset Management Corporation of Nigeria (AMCON) would soon start collecting its annual levies from the commercial banks.
RenCap explained: “This could be the delayed impact of the increase in the CRR for public sector deposits to 50 per cent which came into effect in August. On our estimates, that raised the blended CRR for the average Nigerian bank to about 17 per cent versus Kenyans at 5.25 per cent and Ghanaians at nine per cent.
“In addition, we hear AMCON may be looking to collect its’ annual levies from the banks. To date, the banks have been providing for these but the cash has not been collected. It now looks as if these funds could be removed from the banking system, placing pressure on more illiquid banks.”
However, Rencap noted that efficient and liquid banks such as Guaranty Trust Bank Plc (GTBank) would be able to “adapt and have good balance sheets.”