Concerns for businesses as shortage of money hits banks

• Nigerian companies whitethorn wage much to get since the liquidity of the banking strategy is becoming progressively tightened
• The crunch is expected to rise interbank indebtedness rates successful the coming days, according to fiscal analysts
• This came aft rates ended the erstwhile week connected a mixed enactment arsenic the liquidity of the banking assemblage continued to deteriorate

Legit.ng writer Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.

Nigerian businesses are apt to person to wage much for borrowing fixed that the banking system's liquidity is getting tighter and the shortage has precocious accrued to N1.7 trillion, meaning banks person adjacent little money to enactment with.

As investors looked for greater returns connected their investments, the Nigerian Interbank Treasury Bills True Yield (NITTY) trended upward. Photo Credit: Contributors
Source: Getty Images

Financial analysts are already predicting that the crunch volition thrust up interbank lending rates successful the days ahead, Daily Sun reported.

This followed rates closing connected a mixed enactment past week arsenic the fiscal system's liquidity worsened further, surpassing N1.7 trillion, arsenic a effect of the deficiency of ample inflows to alleviate the prolonged liquidity shortage. This has caused marketplace dynamics to proceed being impacted by this pressure.

As a result, the Over- nighttime Nigerian Interbank Offered Rate (NIBOR) roseate marginally by 0.07 percent points to adjacent astatine 32.90 per cent, reflecting the persistent thinning of strategy liquidity.

Overnight NIBOR means the involvement complaint astatine which banks lend wealth to each different successful Nigeria’s interbank marketplace and the overnight clause means the indebtedness is conscionable for 1 day. It indispensable beryllium paid backmost the adjacent moving day.

Meanwhile, the 1-month, 3-month, and 6-month NIBOR rates declined arsenic banks renegotiated backing obligations.

Although, the Nigerian Interbank Treasury Bills True Yield (NITTY) trended upwards arsenic investors sought higher returns connected their investments. Market sentiment remained beardown pursuing robust request and precocious subscription levels astatine this week’s Nigerian Treasury Bills (NTB) auction.

According to analysts, this was accompanied by an upward question successful halt rates and expectations for the forthcoming Primary Market Auction (PMA) by the Central Bank of Nigeria (CBN) adjacent week.

However, the secondary marketplace for T-bills closed successful bearish territory, arsenic selling unit crossed the mid- and semipermanent segments of the curve pushed the mean marketplace output up by 21 ground points to 19.38 per cent.

Economic experts responded to this improvement by stating that rising interbank rates and the continued liquidity shortage volition astir apt effect successful greater borrowing costs for firms.

According to Victor Chiazor, caput of probe astatine FSL Securities, this could restrict businesses' entree to credit, peculiarly tiny and medium-sized businesses, rise the outgo of backing operations and expansion, and, if it persists for an extended magnitude of time, dilatory down economic growth.

Businesses whitethorn root alternate loan

He emphasized the request for cautious liquidity absorption successful this challenging environment.

“Given the choky liquidity conditions, fiscal institutions request to optimize their reserve absorption to guarantee they tin conscionable their obligations without excessive reliance connected costly interbank borrowing.“Businesses whitethorn request to research alternate backing options beyond accepted slope loans to mitigate the interaction of higher borrowing costs”, helium said.

Increasing interbank rates and the ongoing deficiency of liquidity, according to experts, volition apt marque borrowing much costly for businesses. Photo Credit: Contributor
Source: Getty Images

On their part, analysts astatine Cowry Research, said,

“Next week, we expect the inactive choky interbank liquidity to origin yields to somewhat emergence further successful the secondary treasury bills market. Additionally, CBN is scheduled to behaviour an NTB PMA adjacent Wednesday (March 26), with N700.00 cardinal worthy of maturing bills connected offer”.

65% of Nigerians privation CBN to trim involvement rates

Legit.ng reported that Two-thirds of Nigerian households privation the Central Bank of Nigeria to reduce involvement rates, arsenic they judge it would assistance velocity up economical recovery.

This is 1 of the findings contained successful the caller CBN Household Expectations Survey conducted successful February 2025.

The survey covered nationalist cognition astir cardinal economical issues similar involvement rates, inflation, speech rates and economical assurance implicit the adjacent six months.

PAY ATTENTION: Сheck retired quality that is picked exactly for YOU ➡️ find the “Recommended for you” artifact connected the location leafage and enjoy!

Source: Legit.ng