Banks Cut Borrowing From CBN By 46% To N1.3trn
In apparent reflection of the improved liquidity in the interbank money market, banks’ borrowing from the Central Bank of Nigeria, CBN, fell by 46 per cent, month-on-month, MoM, to N1.3 trillion in January.
On the other hand banks increased deposit of idle funds with the CBN by 29 per cent, MoM, to N272 billion in January.
The CBN has two short term lending windows for banks, namely, the Standing Lending Facility (SLF) and Repo lending.
While the CBN lends money to banks through the SLF at interest rate of 100 basis points (bpts) above the Monetary Policy Rate (MPR), it also lends money to banks through Repurchase (Repo) arrangement, which involves the purchase of banks’ securities with the agreement to sell back at a specific date and usually for a higher price.
On the other hand, the CBN accepts deposits from banks through its Standing Deposit Facility (SDF).
Data from the CBN shows that banks’ borrowing through Repo arrangement dropped significantly by 41 per cent, MoM in January to N952.79 billion from N1.621 trillion in December last year.
Similarly, banks’ borrowing through the CBN’s SLF fell sharply by 56 per cent, MoM, to N313.43 billion in January from N717.34 billion in December.
Consequently, banks’ borrowing from the apex bank through the SLF and Repo rose by 46 per cent, MoM, to N1.3 trillion in January from N2.3 trillion in December.
Financial analysis showed that the decline in banks’ borrowing from the apex bank in January was occasioned by improvement in the volume of idle funds (liquidity) in the interbank money market during the month.
This is reflected in the average daily Opening Position of the market in terms of liquidity which rose by 32 per cent, MoM, to N179.98 billion as at January 28th January from N135.98 billion on December 31st 2021.