Bankers have said it was not their fault that lending rates have kept rising, but very few people see any truth in what they say.
The bankers said their cost to income ratio is an average of 50 per cent. That means, for every N100 income they make, N50 is sunk into making that income, ostensibly because of the dearth of infrastructure. So they have not hidden the fact from anybody who cares to listen the reason they must be extremely cautious in taking the risk of lending.
Their resolve not to play in troubled waters is seen in the increasing level of investments in treasury bills and federal government bonds, among others. Data showed that the money that is withdrawn from the system by the Central Bank of Nigeria (CBN) alone is far above the amount that is shared amongst the three tiers of government by the Federation Account Allocation Commission (FAAC).
For instance, in the first quarter of this year, FAAC allocated a total of N787 billion, but N1.51 trillion was withdrawn through treasury bills and the foreign exchange market alone (official market).
Statistics made available by the FSDH Economic and Financial Markets Review and Outlook suggest that more money would have been sucked from the system if the central bank had decided to sell more treasury bills. As for the foreign exchange (forex) market the public do not know the level of demand.
But figures from the treasury bills transactions show that while subscription stands at N1.54 trillion, only treasury bills worth N710.51 billion were sold.
According to the FSDH, a total of N787 billion hit the system from FAAC in first quarter of 2012 making the market fairly liquid during the period and the CBN adopted the use of Open Market Operation (OMO) to manage the temporary excess liquidity in the market as against Monetary Policy Rate (MPR) hike.
The result of the mopping up was that inter-bank lending rate, also known as the Nigerian Inter-Bank Offer Rates (NIBOR) closed high.
Looking at 7-day NIBOR for the first quarter in 2012, the rate closed higher at 15.54 per cent up from 11.44 per cent as at the corresponding quarter of 2011 and from 14.63 per cent as at full year of 2011. The lowest rate recorded in first quarter of 2012 was 12.79 per cent as against 6.33 per cent in corresponding period of 2011. The highest rate recorded was 16.33 per cent in 2011, up from 11.50 per cent from the same period in 2011 as well.
The lowest rate was recorded towards the end of the quarter under review, in March 2012; and this could be attributed to the fact that the inter-bank market was relatively liquid. The highest rate in the 7-day NIBOR was recorded in February 2012. The average rate for Q1 2012 was 14.45 per cent, while it was 9.23 per cent in the corresponding period of 2011.
A review of the 90-day NIBOR indicated that it ended Q1 2012 at 16.59 per cent, up from 13.84 per cent as at the corresponding quarter of the previous year 2011, and from 15.88 per cent as at the end of 2011. The lowest rate recorded during the period was 14.58 per cent as against 11.13 per cent in the corresponding period of 2011. The highest rate within the period was 17.31 per cent, up from 13.98 per cent in 2011, while the average rate recorded in first quarter of 2012 was 15.87 per cent, up from 12.66 per cent recorded in the corresponding period of 2011.
Treasury bills transactions
At the primary market auctions for government securities, the CBN offered N167.22 billion worth of 364-day Nigerian Treasury Bills (NTB) in the first quarter of 2012, higher by 32.88 per cent from N125.85 billion offered in the corresponding period of 2011. At 346.70 per cent level of subscription, N579.76 billion worth of bids were subscribed in the period under review, while N498.56 billion, representing a subscription level of 396.17 per cent in 2011 was recorded.
A total of N209.34 billion worth of 364-day NTBs were sold in the same quarter, while N376.85 billion was sold in the corresponding period of 2011. N130.00 billion worth of 364-day NTBs were repaid into the system, leading to a net outflow of N129.98 billion from this segment of the market in the first quarter of 2012. A total of N273.79 billion worth of 182-day NTBs were offered, an increase of 30.13 per cent over N210.40 billion offered in the corresponding period of 2011. The level of subscription over the amount offered was 299.28 per cent as N819.40 billion worth of bid was received. Total sale in first quarter of 2012 was N266.96 billion, up by 26.88 per cent from N210.40 billion sold in first quarter of 2011. A total of N190.40 billion worth of 182-day NTBs was repaid into the system, leading to a net outflow of N190.450 billion from this segment of the market.
At the 91-day NTB auctions, a total of N246.01bn was offered, which represents an increase of 27.51 percent from N192.93 billion offered in the first quarter of 2011. The level of subscription was 143.60 per cent, as N353.24 billion worth of bids was received. Total sale during the period of 2012 was N234.21 billion up by 21.40 per cent from N192.93 billion sold in the corresponding period of 2011. A total of N188.34 billion worth of bill was repaid leading to a net outflow of N45.87 billion in the first quarter of 2011 through 91- day NTB.
The average discount rate on the 364-day NTB in Q1 of 2012 was 16.01 per cent, while it was 9.63 per cent in the corresponding period of the preceding year. The lowest and the highest discount rates in the period were 15.55 per cent and 16.90 per cent as against 9.10 per cent and 10.20 per cent, respectively in Q1of 2011.
The average discount rate on the 182-day NTB in Q1 2012 was 15.64 per cent, while it was 9.24 per cent in the corresponding period of 2011. The lowest and the highest rates in the period were 15.00 per cent and 16.10 per cent, as against 8.27 per cent and 10.23 per cent recorded respectively in the corresponding period of 2012.
The average discount rate on the 91-day NTB in 2012 was 14.60 per cent, higher than 7.53 per cent in 2011. The lowest and the highest rates in 2012 were 14.19 per cent and 14.81 percent, as against 6.80 per cent and 9.50 per cent recorded respectively in the corresponding period of 2011.
Foreign exchange market
The CBN offered a total of $5.3 billion through the Wholesale Dutch Auction System (WDAS) in the first quarter of 2012.
The offer represents a decrease of 27.89 per cent over the $7.35 billion offered in the first quarter of 2011. The total amount sold ($5.096 billion, about N800 billion) in Q1 2012 was 30.66 per cent lower than the total amount sold in 2011. Total sale in the period was 96.16 per cent of the amount offered ($5.096 billion).
The value of the Naira appreciated in all the three segments of the foreign exchange market against the US Dollar in Q1 2012.
The average exchange rate recorded in the official market was N156.38/$1 in Q1 2012, up from N150.52/$1 in Q1 2011. The official, inter-bank and parallel markets appreciated by 0.44 per cent, 1.67 per cent, and 3.64 per cent respectively, compared with the depreciation of 1.58 per cent, 2.17 per cent and 1.75 per cent recorded in the official, parallel and inter-bank markets respectively in Q1 2011.
The average premium between the parallel market rate and the official market rate in 2012 was 4.16 per cent, higher than the premium of 2.52 per cent in 2011.
At the inter-bank market, the value of the Naira appreciated by 1.67 per cent to close at N157.72/$1 from N160.40/$1 at the end of March, 2012. In the parallel market the value of Naira also appreciated by 3.64 per cent to close at N159.00/$1 from N160.73/$1 at the end of March, 2012, while at the official market, the value of Naira appreciated by 0.44 per cent to close at N156.01/$1 from N156.07/$1 as at the end of March, 2012.