*Cost of fund continues upward push
By Babajide Komolafe
The scarcity of funds in the banking industry has assumed another dimension with banks issuing special Bankers Acceptances aimed at staff upfront salary to bouy their liquidity position.
The special Bankers Acceptances (Bas) are called Staff Bankers Acceptances with a tenure of 90 days and minimum investment of N500,000. Vanguard investigation reveal that some banks offer 14 per cent interest rate which is paid upfront to the staff. Although, it could not be confirmed if the staff were compelled to invest in the BAs.Â Investigation however reveal that in one particular bank a memo was circulated to staff by the treasury department encouraging staff to invest the upfront salary in the BAs.
Meanwhile, cost of funds continued its upward push in the interbank money market crossing the 13.5 mark on Tuesday. Data released by the Financial Dealers market Association of Nigeria (FDMA) show that interest rate on Call lending rose to 13.66 on Tuesday from 13.1 per centÂ on Monday, while interest rate on Seven Days lending closed at 14.33, up from 13.95 per cent.
Vanguard had exclusively reported last Friday that sacrcity of funds had reemerged in the interbank marketÂ following outflow of N165 billion through withdrawal by Nigeria National Petroleum Corporation (NNPC), Cash Reserve debit and funding of foreign exchange bids at the Wholesale Dutch Auction System (WDAS).
Investigations revealed that the increased intensity of the scarcity of funds in the market last week is largely due to naira outflow for funding of foreign exchange transactions at WDAS. Last week N131.6 billion left the market through foreign exchange, indicating more that 100 per cent when compared to the outflow of N60.5 billion the previous week.
Similarly, N32.7 billion left the market last week due to withdrawal by NNPC from the major banks. Another 1.1 billion left the market due a Cash Reserve Requirement debit of N1.1 billion by the Central Bank of Nigeria.
The liquidity situation would have been more severe but for inflows of N107.4 billion through maturing treasury bills and the Expanded Discount Window (EDW) of the CBN. From maturing treasury bills came N25.11 billion while N81.96 billion came in from the EDW.
Investigation shows that the increasing volume of foreign exchange sales at the Wholesale Dutch Auction (WDAS) in recent times is impacting on market liquidity hence the upward movement of interest rate. Vangaurd investigation revealed that total outflow per week through foreign exchange from the market rose to steadily from N22.2 billion in the first week of August to N60.5 billion in the third week before dropping to N57 billion last week. Total outflow through foreign exchange in July was N172 billion.
Last week, though demand for foreign exchange fell by 18 per cent to $978.47 million from $1.195 billion, total amount sold more than doubled to $875 95 million, from $382.89 million.
The rise in amount sold was due to 100 per cent increase in the amount of foreign exchange offered by the apex bank from $400 million to $800 million, in a bid to assure that it is ready to meet foreign exchange demand.