Customers continue to pay more on loans, earn less on deposits

‘Invisibles’ dollar sales dominate forex utilisation by 48%
Except the seven-day and one-month maturity deposit rates, all other forms of deposits in the banking industry lost values in the fourth quarter of 2017, when compared with the third quarter records.

The development showed a continuation of the long-standing wide gap between interest rates that customers receive for keeping their money in the bank and what they pay to banks to borrow the same money.

An analysis of the fourth quarter Economic Report by the Central Bank of Nigeria (CBN) showed that the average savings rate remain unchanged at 4.08 per cent, while the average term deposit rate fell by 0.05 percentage point to 8.82 per cent.

On the other hand, the average prime lending rate rose by 0.04 percentage point to close at 17.78 per cent, while the maximum lending rate fell by 0.07 percentage point to close at 31.11 per cent in the review quarter.

Consequently, the spread between the weighted average term deposit and maximum lending rates, although narrowed to 22.29 percentage points from 22.31 percentage points in the preceding quarter, still remain high for borrowers.

Similarly, the margin between the average savings and the maximum lending rates also narrowed by 0.3 percentage point to 26.56 percentage points, while the weighted average inter-bank call rate rose to 24.02 per cent from 18.45 per cent in the preceeding quarter.

Meanwhile, the banks accumulated more wealth within the period as the industry’s total assets and liabilities stood at N34.59 trillion at end-December 2017, representing 3.9 per cent increase over the level at the end of September 2017.

The funds were sourced, mainly, from reduction of claims on the Federal Government and mobilisation of demand, time, savings and foreign currency deposits.

The funds were used to increase claims on the central bank (like treasury bills) and the private sector, acquire foreign assets, increase accretion to reserves and reduce unclassified liabilities.

Still, the banks were 5.5 per cent below the level of credit granted to the domestic economy at end-September 2017, with a total of N20.4 trillion at the end of fourth quarter.

Also, the loans-to-deposit ratio, at 72.84 per cent, was 6.77 percentage points and 7.16 percentage points below the level at the end of the preceding quarter and the prescribed maximum of 80 per cent.

Within the period under review, a sectoral foreign exchange utilisation recorded $7.45 billion, indicating 5.5 per cent increase above the level in third quarter, on the back of 7.1 per cent and 5.5 per cent rise in disbursement/utilisation for invisible and visible imports, respectively.

Specifically, the invisible sector accounted for the bulk of utilisation at 47.7 per cent of total foreign exchange disbursed in the fourth quarter of 2017, followed by the industrial sector at 27 per cent.

The minerals and oil sector utilised 9.1 per cent; manufactured products, 7.6 per cent; food products, six per cent; transport sector, 1.4 per cent; and agricultural products, 1.2 per cent.

A total of $5.08 billion was sold by the CBN to authorised dealers in the fourth quarter of 2017, representing 21.6 per cent decline below the level in the third quarter of 2017, but 75.3 per cent above the level in the corresponding period of 2016.

The development relative to the preceding quarter reflected the decline in swaps transactions, sales to BDCs and foreign exchange forwards disbursed at maturity.

Of the total, foreign exchange forwards disbursed at maturity amounted to $2.80 billion or 55.1 per cent, while bureau de change sales and swap transactions were $1.19 billion or 23.4 per cent and $190 million or 3.8 per cent, respectively.

At the inter-bank market, sales however, rose by 30.5 per cent to $90 million or 17.7 per cent of the total.