Banks’ borrowing from the Central Bank of Nigeria has persisted in its upward trend in May, rising by 63 percent, Month-on-Month, MoM, to N1.8 trillion.
The CBN lends money to banks through the Standing Lending Facility (SLF) and Repurchase (Repo) arrangement windows.
While the CBN lends money to banks through the SLF at interest rate of 100 basis points (bpts) above the Monetary Policy Rate (MPR), it also lends money to banks through Repurchase (Repo) arrangement, which involves the purchase of banks’ securities with the agreement to sell back at a specific date and usually for a higher price.
On the other hand, the CBN accepts deposits from banks through its Standing Deposit Facility (SDF) and pays an interest rate of 700 bpts below the MPR.
According to the CBN data, banks’ borrowing through Repo arrangement rose sharply in May by 83 percent, MoM, to N870.3 billion from N474.83 billion in April.
Similarly, banks’ borrowing through the CBN’s SLF rose by 47 percent, MoM, to N897.05 billion in May from N612.43 billion in April.
Consequently, banks’ borrowing from the apex bank through the SLF and Repo rose by 63 per cent to N1.8 trillion in May from N1.09 trillion April.
This implies that banks’ borrowing from the apex bank has risen for three consecutive months after falling by two consecutive months, in January and February. Banks’ borrowing from the CBN rose by 8.0 percent to N720.61 billion in March and further by 51 per cent to N1.09 trillion in May.
On the contrary, banks’ deposits with the CBN dropped for the second consecutive month in May by 9.3 per cent to N318.8 billion from N353.32 billion in April.
In April banks’ deposits with the apex bank dropped by 38 per cent from N572 billion in March.