At no time has the Nigerian banking sector been under such intense pressure as it is presently experiencing since the first and second quarters of 2017.
Feelers indicate that no less than 45 per cent of the banks in Nigeria are affected by the development, which could place a cash crunch on them.
Among the ones in dire straits are Diamond Bank, Skye Bank, Union Bank and Wema Bank, according to a reliable source in the Bankers’ Committee.
The pressure is as a result of the policy of Central Bank of Nigeria (CBN) in which it pumps dollars into the interbank market weekly, and directs all the banks to participate in the exercise.
One of the major concerns of the banks is the continuous rise of the interbank lending rate, which hitherto was hovering between 20 per cent and 25 per cent in the past, but has now gone up to as high as 40 to 45 per cent at the close of business transactions on Friday.
It is still estimated to rise by about 10 per cent before the end of 2017, a situation that is described by experts as worrisome.
The highest percentage rise in the interbank lending rate has been between 2.5 per cent and 3 per cent in 2012 through 2015, until the first week of July 2017. However, an unprecedented rise in the rate was recorded to have hit 8 per cent jump, from 5 per cent rise in the last weekend in June 2017.
Said Mr. Fred Oduyemi, CEO, CAPL Management Consultants: “A budding economy, like that of Nigeria needs to be giving incentives to various sectors contributing to its growth.
“The interbank lending rate is usually a phenomenon in every economy, which is expected to rise minimally any time policy makers try to re-gig monetary policy of the country under reference.
“The apex bank of such country achieves cash mop up each time it sells Treasury Bills, or other financial instruments.
“But the frequency with which CBN is driving the policy, by constantly churning out Treasury Bills, as well as its weekly pumping of dollars into the system has created some sort of pressure and anxiety on the bank managers and their investors.”
In a bid to have a firm control of the weekly dollars sales, CBN has insisted that an auction sale method be adopted, and which makes it compulsory for the 20 commercial banks and the five merchant banks to participate in the interbank market.
The policy was also given a knock by an economist, Henry Moyo, who described the practice as having taken away core banking business from the practitioners.
He said, “A situation that makes banks scamper for cash with which to buy dollars, as against a situation that makes them dispense same increases pressure on the inter bank overnight borrowing.
“The banking system is being forced to let go its duties, which is to help start ups with the needed funds to be up and doing,” he stated.
Before now, bankers were using interbank borrowing mechanism, mainly as a last resort to attend to emergencies.
“What saved the situation from turning into a crisis point, capable of signalling a run on the banks was the Wednesday repay of some matured Treasury Bills, worth 65 billion by the apex bank”, a source in Diamond Bank, who pleaded anonymity stated.
But the CBN spokesman, Isaac Okoroafor, defending the bank’s policy as it relates to making available dollars in the system said it is wrong for anybody to attribute cash crunch suffered by any bank to the dollar policy.
“The auction system makes it possible for virtually all the banks to participate, with the aim of buying dollars, unless they have no need for the hard currency.
“But if such a bank later needs the currency, it will approach the ones having it and may have to meet other conditions”, he said.
However, it was learnt that every week poses another challenge on the banks, as they are often directed to prepare for buying of Treasury Bills or dollars.
One of the bankers told Ripples Nigeria in a phone chat that the apex bank is coming up with sale of two tranches of $120 million per week, as from July 11 till further notice.
There is also a plan by the apex bank to sell Treasury Bills, valued at N30.4 billion after the N25.7 billion to be sold on Wednesday.