Nigerian banks are currently experiencing difficulty in their drive for mobilisation of deposits from individuals and institutional investors.
This is as a result of high returns offered by the government on its debt instruments.
In a report by THISDAY Newspapers, Nigerians now find government debt instruments more desirable than termed deposits in banks thus leading to a cash squeeze in the banking sector.
The cash squeeze affected most of the Tier 2 banks, while the Tier 1 banks are not affected by this trend.
An analyst at Ecobank, Mr Kunle Ezun also confirmed the situation in the money market, noting that the banks are now feeling the brunt.
“A lot of the PFAs, insurance companies and individuals are not willing to do term deposit again. They prefer doing treasury bills. If they do term deposit, they get around seven per cent interest. But they can get as high as 18 per cent from treasury bills. A lot of the banks today are losing deposits because of this,” Ezun said.
A fall in global oil prices has led to a decline in government revenue. Thus making the government to frequent local and international debts market to raise funds.
FGN savings bonds, Diaspora Bond and the Green bonds were also developed towards filling the gap in its revenue stream. All these alongside other debts instruments reduced potential deposits to these banks.