The Guardian
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Deposit, lending rates disparity sustains wide margins


THE nation’s financial system sustained its wide margins between interest rates on deposit and lending all through the months of January and October 2014.

  The Economic Report of the Central Bank of Nigeria for the month of October 2014, though indicated mixed developments in banks rates, but the wider margins remained a constant feature and pared gains.

 Specifically, during the month under review, the seven-day and 12 months deposit rates fell from 4.54 per cent and 9.31 per cent to 4.43 per cent and 9.23 per cent, respectively.

  Also, the average savings deposit rate remained at 3.43 per cent, the same rate in September. 

  However, all other deposit rates of various maturities rose from a range of 8.41 per cent to 9.72 per cent in September to a range of 8.52 per cent to 9.88 per cent, while at 8.48 per cent, the average term deposit rate rose by 0.02 percentage point above the level in the preceding month. 

  Meanwhile, the average prime lending rate rose by 0.04 percentage point to 16.48 per cent during the review month. 

  The average maximum lending rate, at 25.75 per cent, declined by 0.02 percentage point below its level in September, with the spread between the weighted average term deposit and maximum lending rates narrowed by 0.04 to 17.27 percentage points.   

  Similarly, the margin between the average savings deposit and maximum lending rates narrowed by 0.02 to 22.32 percentage points at the end of the review month.

  At the inter-bank call segment, the weighted average rate, which stood at 10.73 per cent in September, increased to 10.98 per cent in October, while the weighted average rate at the Open-Buy-Back segment rose by 1.18 percentage point to 10.51 per cent in the review month. 

  The Nigeria Inter-Bank Offered Rate for the 30-day tenor rose to 12.64 per cent above 12.40 per cent in the preceding month, while with the headline inflation rate at 8.1 per cent at end of October 2014, most rates remained positive in real terms with the exception of the average savings and the seven-day deposit rates

  Banking system credit to the private sector, on month- on-month basis grew marginally by 0.7 per cent to N17.8 trillion, compared with the growth of 1.5 per cent at the end of the preceding month. 

  The development was attributed to the 5.2 per cent and 0.5 per cent increase in claims on the state and local governments and core private sector, respectively. Over the level at end-December 2013, banking system’s credit to the private sector grew by 7.7 per cent.

  At N6.9 trillion, net foreign assets in the banking system declined by 9.1 per cent at end of October 2014, compared with the decline of 0.5 and 0.3 per cent at the end of September and the corresponding month of 2013, respectively. 

  The development relative to the preceding month was attributed to the decline of 17.6 per cent and 7.3 per cent in foreign asset holdings of commercial banks and the CBN, respectively. 

    The money market rates were relatively stable during the review period, as the banking system was awash with liquidity surfeit, occasioned by maturing CBN bills, Cash Reserve Requirement (CRR) credit posting for the maintenance period, Joint Venture Cash call and fiscal injections through statutory revenue released to the three tiers of government.   

  CBN bills of diverse tenors were floated at the Open Market Operations segment to mop up the liquidity surfeit in the system.

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