As of October 11, 2024, Nigerian banks borrowed N930.7 billion from the Central Bank of Nigeria (CBN) via its Standing Lending Facility (SLF), a sign of an increase in the need for liquidity. The seamless functioning of the financial system is ensured by this short-term loan facility, which gives banks short-term borrowing to meet their liquidity needs.
The substantial borrowing highlights how the banks depend on the CBN’s assistance to keep liquidity levels stable, maybe as a result of rising loan demands or consumer withdrawals.
Because of the significant liquidity injections through the Standing Lending Facility (SLF) window (N930.7 billion) and the repayments of Nigeria Treasury Bills (NTB) and Open Market Operations (OMO) totaling N8452.3 billion and N81.9 billion, respectively, system liquidity last week closed higher at 8919.0 billion from the previous close of N304.3 billion.
The cost of short-term interbank funds, as determined by OPR and Overnight (OVN) rates, increased by 13 basis points (bps) and 23 bps week over week (w/w) to 32.4 percent and 33.0 percent, respectively, as a result of the increased activity in the SLF window.
The Central Bank of Nigeria (CBN) changed the lending rate to 31.75 percent in August after lifting the ban on lending to banks through the SLF.
According to a study by Afrinvest Research, the Central Bank of Nigeria provided N3 trillion in loans to banks and discount stores in less than a week.
However, over the same time frame, N493.6 billion was deposited by the lenders and bargain stores through the Standing Deposit Facility.
The study claims that the Central Bank uses the Standing Lending Facility and Standing Deposit Facility as instruments to control the amount of money in circulation and the liquidity of the financial system.
In September 2024, banks that needed cash for short-term obligations borrowed N7.82 trillion from the CBN as a result of the CBN tightening steps in an attempt to curb galloping inflation, which led to illiquidity.
Compared to the N4.04 trillion borrowed in August 2024 at an interest rate of 31.75 percent, this implies a roughly 94% rise.
Nigerian banks and merchant banks borrowed N7.82 trillion in September 2024, which is the fifth-highest sum this year, according to figures made public by the CBN.
An estimated N86.47 trillion was borrowed by Nigerian banks and merchant banks from the CBN between January and September 2024. This amounts to about 384.7 percent of the N17.8 trillion borrowed in the same period in 2023.
ALSO READ:
October’s Supermoon: Celestial Wonders And Cultural Festivities
