Banks in Nigeria are facing liquidity drought and have resorted to borrowing from the Central Bank of Nigeria through the Standing Lending Facility (SLF).
As of April 13, 2023, commercial banks borrowed N432bn from the apex bank to meet cash obligations.
The Central Bank’s Standing Lending Facility is with the objective of providing naira liquidity to eligible institutions that are unable to access funds at the inter-bank market.
The tenure of the facility spans from one business day to the next and it is usually available to businesses between 5.00pm to 6:30pm, while the minimum amount CBN disburses to banks under the SLF is N100m.
CBN accepts Nigerian Treasury Bills, FGN Bonds, CBN Bill among others as securities from banks as part of eligibility criteria.
Analysis of data obtained from the CBN shows that the amount of borrowing by banks under the SLF jumped by 79.5 per cent in a single day, from N240.57bn borrowed on April 12 to N432bn on April 13, 2023.
At the opening of the market on January 3, 2023, banks only borrowed N66.63bn from the CBN to offset cash liabilities.
More worrisome is that between January 3 to April 13, 2023, commercial banks have borrowed additional N365.37 bn which is a rise of over 548 per cent.
This may be linked to the monetary policy stands of the CBN which is suffocating banks.
According to reports, over N11 trillion has been debited from commercial bank deposits since 2019 for failing to meet CBN’s Cash Reserve Requirement and Loan to deposit ratio policies
Currently, banks are required to leave 32.5 per cent of their liquidity with the CBN, a means that apex bank regulates the country’s money supply, inflationary pressure and liquidity.
Kalu Aja, a financial expert told THE WHISTLER that the reason for the increased appetite for the CBN’s SLF is that the “banks needed cash” to meet their obligations.