“It was a nightmare for most treasurers of banks yesterday. This was riding on the heels of the planned deductions – AMCON sinking fund deductions that were supposed to be made yesterday – that came in very late,” Diamond Bank head of retail banking Jude Anele told CNBC Africa on Thursday.
“What you have now is that that deduction has been made, and most banks are now trying to adjust to it, but what you find is that liquidity is tightening them all and lending rates are going to go up, especially in the small and medium-scale sectors.”
Liquidity constraints in Nigeria’s banking sector continue to make headlines and the cost of lending among banks has hit multi-year highs.
Funds of between 400 billion naira and 500 billion naira are, however, expected to come into the market from the government and the Federation Accounts Allocation Committee in the next few days.
“It will help cushion the impact of the speculation that has gone on between yesterday and today. So what you find that will happen is that most of next week will be moderate in terms of rates, but the volatility will continue after next [week],” Anele explained.
Many are however still unsure as to whether rates and the Cash Reserve Requirement will be kept the same in the lead up to the Monetary Policy Committee meeting next week.
“People are still speculating and hedging, so the net placers of funds are keeping close to their funds, the net takers are scampering, quoting high rates. It’s still going to be very volatile in the next one, two weeks. My view is that what has informed most of the decisions the Monetary Policy Committee has taken in the past three, four months is what is happening relative to elections,” Anele added.
“They know the government is going to spend a lot of money, they know political parties are going to spend a lot of money, and this will create some level of inflation in the market. What CBN is trying to do is to have creeping inflation and try to tighten liquidity in the market.”