In Seven Months, Cash-strapped Banks Borrow N9.17tn
Figures obtained from the banking sector regulator has shown that Deposit Money Banks and merchant banks have borrowed the sum of N9.17tn from the Central Bank of Nigeria.
The banks borrowed this through its Standing Lending Facility window within a period of seven months.
Banks often access the CBN’s SLF window to borrow funds, subject to certain eligibility requirements, in order to temporarily address their short-term liquidity needs.Lenders also access the CBN’s Standing Deposit Facility window to deposit their excess cash or reserves.
The CBN revealed that lenders borrowed N7.27tn via the SFL window during the second quarter of 2021, but reduced their borrowing significantly to N1.39tn in the third quarter.
The reports further showed that banks borrowed N503.69bn from the CBN in October.
The CBN third-quarter report on the SLF and SDF windows read in part, “The increased level of liquidity was further evident in the pattern of transactions at the bank’s standing facilities window, as a total request for Standing Deposit Facilities by banks increased by 28.2 per cent to N568.15bn in the review period, while request at the standing lending window declined significantly to N1.39tn, from N7.27tn in the second quarter of 2021.”
The CBN further stated that lending activity dominated at the standing facility window, reflecting liquidity constraints in the segment in October.
It added that in October, “Standing Lending Facility during the month was N503.69bn (comprising N337.78bn direct SLF and N165.92bn Intra-day Lending Facility converted to overnight SLF.
“Daily request ranged from N0.1bn to N108.2bn and averaged N13.58bn in the 15 transaction days, while total interest earned was N0.28bn.
“However, the total request for the SLF in October 2021 represents a 31.7 per cent decline, compared with N737.72bn in the preceding month.”
On the other hand, the report added the total SDF in October was N112.56bn, with a daily average of N7.03bn in 16 transaction days, while the cost incurred on the SDF stood at N0.02bn.
The report noted that the SDF for the month under review was 43.8 per cent lower than the value in the previous month (N200.35bn).
According to the CBN’s half-year activity report, patronage at the SDF window was low during the first half of 2021 as the daily average was N15.11bn, compared to N25.14bn recorded in the first half of 2020.
The reduced volume of transactions was due to tight liquidity in the banking system, the report stated.
Further reports on the first half of 2021 showed that “In the review period, patronage at the SDF window declined to an average daily amount of N15.13bn for the 120 business days, from N25.14bn for the 123 business days in the corresponding period in 2020.
“Similarly, the average daily interest payments on the deposits decreased to N2.38m, from N9.61m in the corresponding period of 2020. The reduced volume of transactions was due to tight liquidity conditions in the banking system.”