Bank borrowing from the Central Bank of Nigeria decreased by 10.6 per cent month on month in May to N10.9 trillion.
The CBN lends money to banks through the SLF at an interest rate of 100 basis points (bpts) higher than the Monetary Policy Rate (MPR), it also lends money to banks through the Repurchase (Repo) arrangement, which involves purchasing bank securities with the agreement to sell back at a later date and usually at a higher price, according to Vanguard.
Meanwhile, the apex bank takes bank deposits through its Standing Deposit Facility (SDF) and pays an interest rate that is 300 basis points lower than the MPR.
According to CBN financial data, banks’ borrowing through the SLF decreased to N10.9 trillion in May from N12.2 trillion in April.
Bank borrowing from the CBN has fallen for two consecutive months following the increase in January when it surged by 268.7 per cent to N3.6 trillion from N976.29 billion in December 2023.
However, banks’ deposits with CBN through the SDF rose MoM by 120 per cent to N943.08 billion in May from N428.9 billion in April.
These trends were propelled by an increase in the amount of idle cash (liquidity) in the interbank money market.
According to the CBN, average daily opening liquidity in the interbank money market increased by 47 per cent MoM to N321.9 billion in May from N218.6 billion in April.
