Banks borrow N930.7bn from CBN through Standing Lending Facility

Nigerian banks borrowed N930.7 billion from the Central Bank of Nigeria (CBN) through its Standing Lending Facility (SLF) as of October 11, 2024, indicating a surge in liquidity demands. This short-term lending facility provides banks with temporary funding to meet their liquidity needs, ensuring the smooth operation of the financial system. The significant borrowing underscores the banks’ reliance on the CBN’s support to maintain liquidity levels, potentially driven by increased customer withdrawals or loan demands.

System liquidity last week closed higher at 8919.0billion from the previous close of N304.3billion, owing to the sizeable liquidity injections via the Standing Lending Facility (SLF) window (N930.7bn), as well as Open Market Operations (OMO) and Nigeria Treasury Bills (NTB) repayments worth N8452.3billion and N81.9billion respectively.

On the back of the elevated play at the SLF window, cost of short term interbank fund as measured by OPR and Overnight (OVN) rates nudge higher by 13 basis points (bps) and 23bps week on week (w/w) to 32.4percent and 33.0percent respectively.

In August, the Central Bank of Nigeria (CBN) , lifted the suspension on lending to banks through its SLF, adjusting the lending rate to 31.75 percent interest rate.

Available records show that banks and discount houses borrowed N3 trillion from the Central Bank of Nigeria within a week, according to a report by Afrinvest Research.

The lenders and discount houses, however, deposited N493.6 billion through the Standing Deposit Facility within the same period.

According to the report, the  Standing Lending Facility and Standing Deposit Facility are tools used by the Central Bank to manage money supply and liquidity in the financial system.

Due to the CBN tightening measures in a bid to tame galloping inflation which resulted to illiquidity, banks needing cash for short-term obligation, borrowed N7.82 trillion from the CBN in September 2024.

This represents about 94 percent increase from N4.04 trillion borrowed in August 2024 at interest rate of 31.75 percent.

According to data released by the CBN, the N7.82 trillion borrowed by Nigerian banks and merchant banks in September 2024 is the fifth highest amount this year.

Nigerian banks and merchant banks between January and September 2024 have borrowed an estimated N86.47 trillion from CBN, representing about 384.7 percent from N17.8 trillion borrowed in 9 months of 2023.

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