Banks in Nigeria appear to be increasingly reliant on the Central Bank of Nigeria, for liquidity as borrowings from the apex bank hits N10.35 trillion.
According to Vanguard, CBN data show that the banks borrowed N10.35 trillion from the CBN’s Standing Lending Facility during the first half of 2023, H1’23, which ended last weekend. This represents a staggering 140 percent year-over-year increase from N4.3 trillion during the same time of 2022, H1’22.
According to the data, the first quarter amount of N4.95 trillion already exceeded the half-year figure for 2022, and additional borrowing increased the dependency by another 5.05 percent to N5.4 trillion in the second quarter of 2023.
The data also reveals that bank deposits in the apex bank’s Standing Deposit Facility declined by 2.0 percent in the second quarter of 2023 to N898.25 billion from N1.36 trillion.
The two quarters’ combined effects, however, resulted in a 34 percent increase in the banks’ SDF balances with the CBN during the first half of ’23.
The increase in bank borrowings from the SLF is a result of the economy’s ongoing increase in currency in circulation and cash outside of banks.
The CBN’s currency redesign actions between Q4’22 and Q1’23 had increased bank liquidity significantly, whereas CIC saw a sharp fall.
However, the liquidity trend changed direction after the policy was suspended in Q1 of 2023.
Although, according to a member of the Monetary Policy Committee, Mrs. Aishah Ahmad, in the CBN Communique No. 148 of the 291st Meeting of the MPC with members’ personal statements held in May 2023, the banking industry soundness indicators are still strong as of April 2023, with capital adequacy ratio at 45.3 percent (above the 30.0 percent minimum) even as a credit to the real sector continued to grow.
“Stress test findings demonstrated that industry solvency and liquidity positions could withstand mild to moderate shocks in the short to medium term,” she continued.
“However, the sector must continue to create sufficient capital buffers; in this regard, the continuous application of Basel III capital regulations, which call for more capital buffers, is crucial.”
