Tuesday, March 06, 2018/ 08.48
AM / FBNQuest Research
stark conclusion from today’s chart is that term depositors are poorly rewarded
when we adjust their rates for inflation. On the same basis, it appears that
borrowers on the prime lending rate enjoy competitive terms. For the
depositors, the advice would be to invest in mutual funds (if possible).
the borrowers, we understand that the prime rates are available only to a
select few and would generally be topped up by bank fees. The spread between
the average maximum lending and term deposit rates, a measure cited by the CBN,
was 22.3% in November 2017.
Of the rates in
the chart, only the interbank call moves significantly between months. The
drivers include: retail and wholesale fx Secondary Market Intervention Sales by
the CBN; OMO auctions and maturities; and FAAC distributions for state and
local governments (and the FGN before the full functioning of the Treasury
Single Account). We would add monetary policy rate changes except that there
were none in the period covered by the chart.
more-or-less straight lines for the three other rates in the chart other than
an unexplained blip for prime lending in March 2017. One explanation lies in
the size of the unbanked economy.
Of the adult
population of 96.4 million at end-2016, data from Enhancing Financial
Innovation and Access show that 58.4% were financially served (either formally
or informally) and 41.6% excluded. The figure for the banked population was 38.3%
of the total. Would-be borrowers are competing for loanable funds at the banks
from a position of weakness.
We raised yesterday the dilemma for the
banks as to whether they should increase significantly their lending to the
real economy (Good
Morning Nigeria, 05 March 2018)
now that yields on FGN paper have declined sharply (and are now negative in
real terms). There is a similar dilemma for the PFAs.
Yields Stay Flat as CBN resumes OMO
System Liquidity Expected to Bolster Yields
Investment Opportunity in the March 2018 FGN Savings Bond
- CBN Calms
Market with c.N277bn OMO Sales
- PMA Rates
Clear lower as DMO Unexpectedly Cuts offer Size in half
- VFD Group
Achieves 175% Subscription on Debt Note Offer
Moderates System Liquidity with c.N250bn OMO Sales ahead of T-bills PMA
Rates decline on FAAC Expectations
System Liquidity to Drive Buying Interest as PMA holds on Wednesday