05 October 2015, Lagos – Contrary to fears of liquidity stranglehold, a total cash inflow of about N1.68 trillion was received by banks in September on the heels of the implementation of the Treasury Single Account, TSA, policy by the Federal Government, a development which has created high liquidity, while crashing money rates last week.
The high liquidity is expected to persist this week.
Of this amount, the Bankers’ Committee Meeting, last weekend, confirmed the largest chunk was N740 billion from Cash Reserve Requirment, CRR, write-back released previous week by the Central Bank of Nigeria, CBN, following the reduction of the CRR to 25 percent from 31 percent.
A breakdown of other inflows, according to money market operators, came from the various government maturing securities and Federation Account Allocation Committee, FAAC, releases comprising N234.47 billion, N101.53 billion, N76.58 billion, N292.3 billion and N237.12 billion on September 3, 10, 17, 24 and last week, respectively.
A total of N197 billion in matured Open Market Operation, OMO, bills was retired last Friday, while CBN did not issue new bills to mop up funds in an attempt to keep money rates low.
Banking system credit had opened at N189 billion on that Friday before the cash flow hit the system, lifting the sector’s total cash balance with the apex bank to N386 billion.
Money market operators told Vanguard that with these developments the general fears of liquidity squeeze and rate spike in the money market, following the TSA implementation in the third week of the month, were not experienced.
The TSA had sent the interbank rates over 50 percent before further cash inflows crashed the rates to 6.5 percent by end of third week.
However, by last week additional inflows had sent the rate further crashing to 3.5 percent market average, about the lowest this year.
The overriding net flow of cash appeared to have tamed the equally huge outflows recorded during the period as total cash withdrawals amounting to about N636.8 billion was recorded, in addition to over a trillion Naira TSA withdrawals.
The Bankers Committee meeting last week denied that TSA withdrew about N1.2 trillion from the system, as the Managing Director of Fidelity Bank Plc, Mr. Nnamdi Okonkwo, said the banking industry was still collating the total figure lost to TSA during the month.
*Emeka Anaeto – Vanguard