Commercial banks’ borrowing from CBN drops for second consecutive month

Commercial Banks borrowing from the Central bank of Nigeria for the second consecutive month dropped and now stands at N666 billion

CBN revealed this in its latest financial data published on its website and obtained by Ripples Nigeria.

Banks and merchant banks often access the CBN’s Standing Lending Facility (SLF) window to borrow funds, subject to certain eligibility requirements, in order to temporarily address their short-term liquidity obligations.

The apex bank lends money to banks and merchant banks through the SLF at interest rate of 100 basis points (bpts) above the Monetary Policy Rate (MPR) of 11.50 per cent.

The CBN also lends money to banks and merchant banks through Repurchase (Repo) arrangement, which involves the purchase of banks’ securities with the agreement to sell back at a specific date and at higher price.

According to CBN data through Repo, banks borrowing dropped by 47 per cent, MoM in February 2022 to N480.35 billion from N952.79 billion in January.

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

N952.8billion in January 2022 from N9.5million reported in January 2021.

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.

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

This is reflected in the 70 per cent, 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 from December 31st 2021.

The impact of this trend was 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.

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