Banks’ Borrowing From CBN Drops By 76% – Report

The borrowing by various banks from the Central Bank of Nigeria (CBN) through the Standing Lending Facility (SLF) experienced a significant decline of 76.4 per cent month-on-month, decreasing to ₦4.04 trillion in August from ₦17.12 trillion in July.

According to the CBN Financial Data, there was a notable increase in banks’ deposits within the CBN Standing Deposit Facility (SDF), which surged by 270.7 per cent month-on-month, rising to ₦8.12 trillion from ₦2.19 trillion in July.

These trends suggest that banks are currently holding excess funds, which are not being utilized by businesses, likely due to the elevated borrowing rates following the recent hike in the Monetary Policy Rate (MPR).

This situation arises in the context of the CBN’s recent adjustments to the SDF rates, aimed at reducing the tendency of banks to maintain surplus liquidity at the CBN and encouraging more lending activities.

The adjustments were outlined in a circular issued after the 296th Monetary Policy Committee (MPC) meeting, during which the apex bank modified the Asymmetric Corridor surrounding the MPR from +100/-300 basis points (bps) to +500/-100 bps to discourage banks from retaining excess liquidity.

Additionally, the CBN has increased the SLF rate, which banks utilize for short-term borrowing, to 31.75 per cent.

For commercial and merchant banks, the SDF rate for deposits up to N3 billion at the CBN has been raised to 25.75 per cent, while deposits exceeding N3 billion will now earn a rate of 19 per cent.