How bank borrowing from CBN hit N21.87trn

Marcus Amudipe
Marcus Amudipe

Data from the Central Bank of Nigeria financial information has revealed that deposit money banks borrowed N21.87 trillion from the CBN in 2020 through the Standing Lending Facility window and the Repurchase Lending platform.

When compared to the N5.744tn recorded via the same windows in 2022, this is a 260 percent increase. However, when compared to the N27.08 trillion the banks borrowed from the apex bank in 2021, it represents a 19.3% drop.

For banks and merchant banks, the apex bank offers two short-term lending options: the Standing Loans Facility and Repurchase (Repo) lending.

While the CBN provides loans to banks and merchant banks through the SLF at an interest rate that is 100 basis points higher than the Monetary Policy Rate, it also provides loans to banks through the Repo arrangement, which entails the purchase of securities from banks with the promise to resell them at a later date and typically for a higher price.

According to financial information provided by the CBN, bank and merchant bank borrowing through the SLF decreased by 14.25% in 2022 to N11.15 trillion from N13.01 trillion in 2021.

The SLF breakdown by month showed that in January 2022, the DMBs and commercial banks borrowed N313.48bn from the CBN. However, in February, it decreased to N186.48 billion.

According to financial information provided by the Apex Bank, SLF data in March was N377.13 billion, and in April 2022, it climbed by another 62.4% month over month to N612.4 billion.

The CBN recorded N897.05bn in borrowing for May, and N1.93tn in borrowing for June, a huge rise.

However, the top bank’s financial figures indicated N1.46 trillion and N1.19 trillion, respectively, for July and August 2022.

The DMBs and merchant banks also took out loans of N1.56 trillion in November, N1.56 trillion in December 2022, N1.56 trillion in November, and N836.5 billion in September.

As a result, from the N14.07tn indicated by financial data in 2021, borrowing by DMBs and merchant banks through the CBN’s Repo decreased by 24 percent to N10.7tn in 2022.

The CBN’s figures for repo showed N968.8 billion in January but N480.35 billion in February. Nine Repo transactions totaling N343.48 billion were announced in March. But in April, it rose to N474.83 billion.

According to CBN data for other months, N1.197tn was borrowed in September, N1.197tn in October, N1.197tn in June, N1.65tn in June, N3.07tn in July, N1.62tn in August, and N870.32bn in May.

No Repo transactions were found in the financial data for November or December 2022.

Analysts have ascribed the fall to the banking system’s limited liquidity conditions as the central bank boosts its monetary ratios to combat rising inflation.

Apart from the SLF and Repo, the CBN also takes bank deposits through its Standing Deposit Facility and pays an interest rate that is 700 basis points less than the MPR, which is now 16.5%.

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