Out of cash: Nigerian banks borrow N9.17tn from CBN in seven months

Commercial and merchant banks in Nigeria borrowed the sum of N9.17 trillion from the Central Bank of Nigeria (CBN) through its Standing Lending Facility (SLF) window within a period of seven months.

This is according to figures obtained from the CBN’s third-quarter report on the SLF.

The report revealed that lenders borrowed N7.27tn via the SFL window during the second quarter of 2021, but reduced their borrowing significantly to N1.39tn in the third quarter.

Banks access the CBN’s SLF window to borrow funds, subject to certain eligibility requirements, in order to temporarily address their short-term liquidity needs.

Lenders also access the CBN’s Standing Deposit Facility window to deposit their excess cash or reserves.

The apex bank’s report further showed that banks borrowed N503.69bn in October.

“The increased level of liquidity was further evident in the pattern of transactions at the bank’s standing facilities window, as a total request for Standing Deposit Facilities by banks increased by 28.2 per cent to N568.15bn in the review period, while request at the standing lending window declined significantly to N1.39tn, from N7.27tn in the second quarter of 2021,” the report said.

According to the apex bank, lending activity dominated at the standing facility window, reflecting liquidity constraints in the segment in October.

It added that in October, “Standing Lending Facility during the month was N503.69bn (comprising N337.78bn direct SLF and N165.92bn Intra-day Lending Facility converted to overnight SLF.

“Daily request ranged from N0.1bn to N108.2bn and averaged N13.58bn in the 15 transaction days, while total interest earned was N0.28bn.

“However, the total request for the SLF in October 2021 represents a 31.7 per cent decline, compared with N737.72bn in the preceding month.”

The report added the total SDF in October was N112.56bn, with a daily average of N7.03bn in 16 transaction days, while the cost incurred on the SDF stood at N0.02bn.

According to it, the SDF for the month under review was 43.8 per cent lower than the value in the previous month (N200.35bn).

According to the CBN’s half-year activity report, patronage at the SDF window was low during the first half of 2021 as the daily average was N15.11bn, compared to N25.14bn recorded in the first half of 2020, a reduction it attributed to tight liquidity in the banking system.

The report stated further that, “In the review period, patronage at the SDF window declined to an average daily amount of N15.13bn for the 120 business days, from N25.14bn for the 123 business days in the corresponding period in 2020.

“Similarly, the average daily interest payments on the deposits decreased to N2.38m, from N9.61m in the corresponding period of 2020. The reduced volume of transactions was due to tight liquidity conditions in the banking system.”