Banks Cut Borrowing From CBN By 47%

Banks’ borrowing from the Central Bank of Nigeria has fallen for the second consecutive month in February, by 47 percent to N666 billion while banks increased the deposit by 80 percent to N489.05 billion in February.

This driven by further improvement in the level of liquidity in the interbank system. In January, banks borrowing from the apex bank fell by 46 percent to N1.3 trillion while their deposits rose by 29 per cent to N272 billion.

The CBN has two short term lending windows for banks, namely the Standing Lending Facility (SLF) and Repo (Repurchase) lending.

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 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).

Breakdown Anaylsis

Analysis of data from the CBN showed that banks’ borrowing through Repo arrangement dropped significantly by 47 per cent, MoM in February  to N480.35 billion from N952.79 trillion in January.

Similarly, banks’ borrowing through the CBN’s SLF fell sharply by 40  per cent, MoM, to N186.48 billion  from N313.43 billion in January.

Consequently, banks’ borrowing from the apex bank through the SLF and Repo fell by 47 per cent, MoM, to N666.8 billion in February from N 1.266 trillion in January.

The two consecutive months decline in banks’ borrowing from the apex bank follows continued improvement in the level of liquidity (idle funds) in the interbank money market.

This is reflected in the 70 percent, MoM, increase in the average daily Opening Position  of the market in terms of liquidity to N306.55 billion in January from N179.98 billion in January.

The above followed a similar trend in January when the  average daily Opening Position  of the market rose by 32 per cent, MoM,  to N179.98 billion as at January 28th  January from N135.98 billion on December 31st 2021. The impact of this trend is reflected in the second increase in the SDF for the consecutive month, which rose by 80 per cent to N489.05 billion in February from N271.66 billion in January.

Kehinde Ogunyale

Reporting on the data-driven economy, and investigations.

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