Banks Borrow N17.85tn from CBN in 2023
Commercial and merchant banks borrowed a whooping N17.85 trillion from the Central Bank of Nigeria (CBN) to meet their daily business obligations amid macro economic challenges in 2023.
This presents an increase of 60 per cent over the N11.15 trillion the financial institutions borrowed from the central bank in 2022.
Although Nigerian banks reported impressive nine months ended September 30, 2023 results, the operating conditions was intense due to high inflation, rising interest rates and US dollar shortages, in addition to continued regulatory intervention and the disruption caused by the general election and scarcity of local currency.
In Nigeria, deposit money and merchant banks access lending from the CBN using the Standing Lending Facility (SLF) window and deposit cash with the apex bank using the Standing Deposit Facility window (SDF).
The applicable rates for the SDF and SLF increased by 50 basis points to 11.50 and 19.50 per cent, respectively, following the hike in the policy rate by 50 basis points to 18.75 per cent in June 2023.
The Monetary Policy Committee of the CBN unanimously narrowed the asymmetric corridor from +100/-700 to +100/-300 basis points around the Monetary Policy Rate (MPR).
The CBN consistently maintained a hawkish monetary policy stance since May 2022, to tackle rising inflation rate, which stood at 28.20 per cent as of November 2023.
The CBN provides the SLF, a short-term lending window, for commercial and merchant banks, to access liquidity to run their day-to-day business operations.
According to reports, banks’ borrowing from the apex bank was fluctuating in 2023, indicating a continuous decline in banking system liquidity.
The decline in banks liquidity can also be traced to low cash deposit by bank customers, which resulted in cash scarcity in banks.
The breakdown of the borrowing revealed that commercial banks and merchant banks in Q1 2023 borrowed N4.96 trillion from the CBN as against N877.1billion in Q1 2022, while in Q2 2023, a total amount of N5.29 trillion was borrowed as against N3.44 trillion in Q2 2022.
Furthermore, the banks borrowed N6.24 trillion from CBN in Q3 2023 from N3.48 trillion in Q3 2023 and in Q4 2023, about N1.36 trillion was borrowed by the financial institutions as reported by the CBN in its financial data.
