UPDATE 2-Nigeria takes $ 3.9 billion from banks to absorb liquidity and support the naira
* Naira was hit after falling oil prices
* The central bank withdraws excess liquidity from banks
* Money market rates climb to 35% – bankers (add additional details, bullets)
ABUJA, April 24 (Reuters) – Nigeria’s central bank has raised 1.4 trillion naira ($ 3.9 billion) from banks with excess liquidity as part of the currency support measures, said to Reuters banking sources.
The naira has hit new lows in the spot and black markets since last month after the central bank adjusted its official rate, involving a 15% devaluation, to absorb the impact of a triggered oil price crash by the coronavirus pandemic.
The naira hit 420 per dollar on the black market this week for the first time since February 2017, 14% lower than the official market rate. The currency was listed at 386.33 Naira on the spot market on Friday.
In the undeliverable futures market, one-year dollar / naira futures broke through 500 naira to the dollar this week.
The central bank in January raised the cash reserve ratio (CRR) that banks must hold from 500 basis points to 27.5%, the first increase in four years to curb excess liquidity in the banking system, which she said was contributing to inflation.
Bankers said Friday the CRR’s debit was over 27.5% and was unrelated to a penalty set for lenders who failed to meet a regulatory loan-to-deposit target.
Bank lending totaled 260.17 billion naira at the opening on Friday against 817.69 billion naira the previous session, according to central bank data. Banks were inundated with liquidity after the government released N780.9 billion to states on Wednesday as part of a March budget payment.
Nigeria’s 28 commercial and investment banks have been affected by the increase in throughput. Zenith Bank had the highest amount parked at the central bank with 355.95 billion naira, followed by First Bank with 208.1 billion and United Bank for Africa with 204.75 billion. Standard Chartered Bank was billed 120.65 billion naira and Stanbic IBTC 143.97 billion.
The central bank did not respond to the request for comment.
The bank uses withdrawals from liquidity reserves to mop up liquidity. It often reinjects liquidity to stabilize the markets.
The reason for the tax was not immediately clear, especially at a time when lenders grapple with the fallout from the novel coronavirus on Africa’s largest economy.
Nigeria has reported 981 coronavirus cases and 31 deaths, the country’s Center for Disease Control said on Friday.
The central bank has put in place a N1 trillion stimulus package to stimulate the economy and cut rates on subsidized loans to certain sectors, but has not specified how it will finance the interventions.
The government has also requested $ 3.4 billion in emergency funding from the IMF to combat the impact of the coronavirus.
Money market rates climbed to 35% on Friday after the debit, down from just 2% the previous session.
In October, the central bank levied a charge of more than 400 billion naira on 12 banks for failing to increase lending to meet a regulatory target.
The central bank of the day asked lenders to maintain a minimum loan-to-deposit ratio or face a higher cash reserve drawdown, as part of measures to circulate credit. ($ 1 = 360.00 naira) (Additional report by Camillus Eboh and Alexis Akwagyiram in Lagos; Editing by Catherine Evans, Alex Richardson, Kirsten Donovan)