At 42% MoM Increase, DMBs Deposit with CBN Hits N822.34bn
Nume Ekeghe
Deposit Money Banks (DMBs) deposited N822.34 billion with the Central Bank of Nigeria (CBN) in July 2023, the apex banks’ Financial Data posted on its website has revealed.
The N822.34 billion represents 42 per cent Month-on-Month (MoM) increase from N579.27 billion in June 2023.
Analysts attributs the development to excess liquidity in the banking sector and hedging by banks to enhance Capital Adequacy Ratio (CAR).
Analysis of the CBN figurs revealed that DMBs in January deposited N584.79 billion; N668.87billion and N471.39billion in February and March 2023, respectively.
In April, a total N223.04billion was deposited and it increased to N461.85billion in May 2023.
DMBs through Standing Deposit Facility (SDF) hits highest figure since the beginning of the year as N1.959trillion was disbursed to three tiers of government in July 2023.
The SDF is a lower corridor of the Monetary Policy Rate (MPR) at which DMBs and discount houses can deposit money overnight with the CBN for an interest rate.
The applicable interest rate on SDF moved to 7 per cent at an asymmetric corridor of +100/-300 basis points around the 18.75 per cent MPR in July 2023 from +100/-700 basis points.
MPR is the benchmark interest rate that determines other interest rates in the financial system.
According to analysts, the shared N1.959trillion in July 2023 awash the banking sector with excess liquidity, leaving banks with no choice than to deposit with the CBN.
The N1.959 trillion is nearly triple the N786.161 billion shared in June and more than triple the N655.93 billion in May 2023.
Commenting, the Head, Financial Institutions Ratings at Agusto & Co, Mr. Ayokunle Olubunmi, attributed the 42 per cent to excess liquidity in the banking sector amid hike in FAAC allocation and increasing money supply.
According to him, “If inter-bank interest rate is less than one per cent, and as a bank, I have access cash, the best thing to do is saving with CBN. So, the increase in SDF is a function of money in circulation and a lot of banks are awash with liquidity.”
