Nigerian banks have frozen the interbank money market to await further instructions on how to comply with a directive to transfer government revenues into a single account with the central bank.
One of the dealers said: “no trading is currently going on because no bank was willing to put out quotes until there is a clearer direction with the implementation of the Treasury Single Account. The market is right now frozen, as no trading going on.”
Analysts have predicted that implementation of the government policy will drain naira liquidity from the banking system, potentially putting some banks in a dire situation.
The overnight lending rate closed at 5 percent on Monday, but dealers said the rate was initially quoted at 200 percent on Tuesday. No deals were done using that rate.
Chief executive at Financial Derivative Company, Mr.Bismarck Rewane, confirmed that about 1.2 trillion naira, or 10 percent of banking sector deposits, would be transferred to the government account with the central bank, in the course of implementing the TSA policy.
“We expect an initial paralysis in the market and a disruption of operations of some of the banks, but they would overcome that.”
He said the central bank could reduce the size of the cash reserve requirement (CRR) commercial lenders are expected to keep with it and inject some liquidity into the banking system to minimize the impact of the new account policy.
The CRR, which is the amount the central bank requires banks to set aside, is currently 31 percent for both public and private sector deposits.
It would be recalled that President Muhammadu Buhari ordered that all revenues be paid into the “Treasury Single Account” (TSA) with effect from today, September 15, as part of a drive to fight corruption and aid transparency. [myad]
