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Banks set to Fund Emefiele’s N10 trillion Securitisation Plan

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Nigerian Banks are being geared up to fund a proposed N10 trillion securitisation plan to shift the development financing and interventions on the balance sheet of the Central Bank of Nigeria (CBN) to the Finance Ministry.

Sources tell MoneyCentral that the Apex Bank plans to achieve this by the release of Cash Reserve Requirements (CRR), in the form of CBN special bills.

“This will enable banks to fund the upcoming securitisation,” one source told MoneyCentral.

The CBN will refund the excess CRR by issuing special bills to banks (which they can tender for cash if need be through the Expanded Discount Window). The Special Bills will have a tenor of 90 days, subject to rollover at the instance of the CBN.

It will also be a zero coupon bill with an implied yield to be worked out by the CBN.

“Its positive for banks liquidity ratio. It should put about N10 trillion liquidity into the system. Its also earnings positive and hopefully the CBN will issue the special bills at reasonably higher rates than in Primary Market Auctions.”

Nigerian banks restricted balances with the Central Bank of Nigeria (CBN) soared by 85 percent to N8.83 trillion (December 2019: N4.75 trillion) as at 30 September 2020, representing the cash reserve requirement (CRR), according to data compiled by MoneyCentral.

The CRR is a mandatory cash deposit which should be held with the Central Bank of Nigeria, as a regulatory requirement.

CRR is non-interest bearing and is not available for use in bank’s day-to-day operations. As at 30 September 2020, the CRR in force was 27.5 percent (Dec 2019: 22.5%).

The data was compiled from 11 banks that have released 9 months 2020 results.

Sources tell MoneyCentral that some banks like Stanbic IBTC, Standard Chartered and Citi have CRR averages of about 140 percent of Local Currency deposits.

The International Monetary Fund (IMF) recently urged the CBN to securitize some of the assets on its books such as overdrafts to the federal government to enable it unwind its balance sheet.

The Central Bank of Nigeria (CBN), has at least 18 Development Finance Operations across various sectors of the Nigerian economy.

These include the Agricultural Credit Guarantee Scheme (ACGS), Interest Drawback Programme (IDP), Commercial Agriculture Credit Scheme (CACS), Paddy Aggregation Scheme (PAS), Micro, Small and Medium Enterprises Development Fund (MSMEDF), Anchor Borrowers’ Programme (ABP), Presidential Fertilizer Initiative (PFI), National Food Security Programme (NFSP), and the National Collateral Registry (NCR).

Others are the SME Credit Guarantee Scheme (SMECGS), Small and Medium Enterprises Restructuring and Refinancing Facility (SMERRF), Real Sector Support Facility (RSSF), Textile Sector Intervention Fund (TSIF), Power and Airline Intervention Fund (PAIF), Nigeria Electricity Market Stabilisation Facility (NEMSF), Nigeria Bulk Electricity Trading Payment Assurance Facility (NBET-PAF), Non-oil Export Stimulation Facility (NESF), and Export Development Facility (EDF).

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