•Savings, lending rates gap narrows to 27%
•Apex bank cautions transaction-switching firms on lapses
The nation’s Deposit Money Banks (DMBs) opted to deposit a whopping N545.71 billion in the tills of the Central Bank of Nigeria (CBN) than deploying them in the economic segments of the country, earning just N180 million in the month of October 2019. The development, which confirms deep-seated apathy against the country’s business environment by banks, despite policy reforms by the industry regulator, also shows the need for government to step up efforts on ease of doing business, particularly the long-sought infrastructure facelift.
The Economic Report for the month of October showed that banks dumped cash in the apex bank’s Standing Deposit Facility (SDF), with a daily average of N30.32 billion in the 18 transaction days from October 1 to 25, 2019. Their daily deposit ranged from N6.9 billion to N43.9 billion, while CBN’s incurred cost on SDF in the month stood at N180 million, at 8.5 per cent interest rate.
The apex bank’s standing facilities were created for commercial banks and the merchant banks to square-up their daily positions, which in October 2019, they continued to access. However, the records at the CBN standing facilities window also showed patronage at the Standing Lending Facility (SLF), where banks borrow at 15.5 per cent.
Specifically, the total SLF granted to banks during the review period was N319.28 billion, made up of N227.68 billion direct SLF and N91.6 billion Intraday Liquidity Facility (ILF) converted to overnight repo. Daily average facility to banks was N17.74 billion in the 18 transaction days from October 1 to 25, 2019, ranging from N420 million to N148.96 billion, while CBN earned the same N180 million interest charges on N319.28 billion, compared with N545.71 billion that banks deposited at SDF.
Similarly, provisional data indicated that movements in banks’ deposit and lending rates were mixed in the month under review.With the exception of the three-month and six-month deposit rates, which fell by 0.6 per cent and 0.2 per cent below their respective levels in the preceding month, all other deposit rates, of various maturities, rose from a range of 3.18 per cent to 9.97 per cent in the preceding month to a range of 3.23 per cent to 9.99 per cent in October 2019.
The spread between the average savings deposit and maximum lending rates narrowed by 0.25 percentage point to 27.25 percentage points at end-October 2019, but still represents a wide gap. The weighted average prime lending rate rose by 0.19 percentage point to 15.34 per cent, while the maximum lending rate declined by 0.25 percentage point to 31.18 percent in October 2019. Consequently, the spread between the average term deposit and the maximum lending rates narrowed by 0.26 percentage point to 22.82 percentage points at end-October 2019.
Meanwhile, the apex bank conducted an examination of licensed transaction-switching companies, mobile money operators and accredited cheque printers, to monitor compliance with relevant policies, guidelines and standards. Apex bank’s Financial Stability Report noted that appropriate measures have been recommended to correct the observed lapses.
The examination, however, revealed a number of infractions, ranging from lack of fraud management tools; failure to conduct failover test; non-compliance with biometric access to restricted areas; to late/non-rendition of regulatory returns. Other infractions unearthed include non-documentation of issues and remedial actions taken to prevent recurrence.