Commercial banks borrow N4.4tr from CBN in 3 months

Data obtained from the regulator indicated that during June and August, Deposit Money Banks (DMBs) accessed a total of N4.4 trillion from the Central Bank of Nigeria (CBN) through its overnight lending window.Information Guide Nigeria

Subject to certain qualifying restrictions, banks frequently use the CBN’s Standard Lending Facility (SLF) to borrow money to close their short-term liquidity gap. The Standing Deposit Facility (SDF) window, on the other hand, is another tool used by lenders to deposit extra money.

Access to SLF by commercial banks is 100 basis points higher than the monetary policy rate (MPR). Lenders in the case of SDF receive 700 basis points less than the current benchmark interest rate (seven per cent).

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The total SLF for the months of June through August was N4.44 trillion, with June accounting for more than 43.3% of the total accessed during that time. In July, it was N1.46 trillion as opposed to N1.93 trillion in June. It fell even more last month, at 1.06 trillion.

Only in June did the SLF double its May value of N953.6 billion. The reflection observed during the past three months might have indicated a gradual easing of the banks’ struggles with short-term liquidity. It might also imply that banks have aggressively revised their risk assessments.JAMB Result

The behaviour of the SDF trend, which may be viewed as an increasing function of risk premium, in the two closely connected possibilities is also shown.

Repurchase orders (repo), a short-term agreement to sell securities and then buy them back at a slightly higher price that banks also employed to control temporal illiquidity, saw a 55.5 percent decline in activity last month. In August, the repo market was worth N1.36 trillion.

The three-month transaction was N6.08 trillion after repo transactions in June and July were N1.65 and N3.07 trillion, respectively.

Excess overnight deposits (SDF) increased in August, but the banks’ exposure to repo and SLF decreased. The patterns indicate that either banks were more risk averse or deposit mobilisation increased.

With the expansion, 34% of banks’ loan portfolios are now exposed to the public sector. This suggests that the government and its related institutions hold around one-third of commercial loans.

Although the amount of credit granted to the private sector rose during the time as well, the expansion was slower. From N34.92 trillion in December 2021 to N39.87 trillion in July, the sum increased.

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