CBN lending to Banks increases by 315% to N24.53trn in 11 Months


Between January and November, Deposit Money Banks and Merchant banks’ borrowing hit N24.53 trillion indicating an increase of 315 percent when compared to N5.91trillion borrowed in the previous year.

Banks’ increased borrowing signaled scarcity of funds (liquidity) in the interbank money market forcing banks to rely more on the Central Bank of Nigeria (CBN) for short-term liquidity needs. The central bank has two short-term lending windows for banks and merchant 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) of 13 percent, it also lends money to the banks through Repurchase (Repo) arrangement, which involves the purchase of banks’ securities with the agreement to sell back at a specific date and at a higher price.

Data from the CBN official website showed that banks’ and merchant banks borrowing through the SLF rose by 315.2per cent to N12.23trillion from N5.17trillion while borrowing through the Repo arrangement moved to N5.15trillion from N735.14billion the previous 11 months.The Governor, CBN, Godwin Emefiele at the last Monetary Policy Meeting (MPC) in Abuja said money market rates oscillated within the standing facilities corridor, reflecting the prevailing liquidity conditions in the banking system.

According to Emefiele, the decision to keep the interest rate and other parameters was borne out of the decision to continue the gains recorded in the economy. In the last four quarters following the exit from the recession in 2020 Nigeria’s economy has recorded positive growths.

According to the National Bureau of Statistics, Nigeria’s real Gross Domestic Product (GDP) grew by 4.03 percent (year-on-year) in the third quarter (Q3) of 2021, and also 5.01 in Q2 2021 from 0.51 percent in Q1 2021.