The Central Bank of Nigeria (CBN) has officially lifted the suspension on bank borrowing from its Standing Lending Facility (SLF), a key tool in its monetary policy framework. This move comes after the decisions made during the 296th Monetary Policy Committee (MPC) meeting, where significant adjustments were made to the lending framework.
The CBN has set the lending rate at 31.75%, reflecting the MPC’s decision to adjust the upper corridor of the standing facilities. The rate is now set at 5% above the Monetary Policy Rate (MPR), marking a significant increase from the previous 1%.
In a statement issued by Omolara Duke, Director of the Financial Markets Department, dated August 26, 2024, the CBN outlined the new borrowing terms. Banks and authorized dealers are now permitted to access the SLF at the newly established rate of 31.75%. Additionally, they can access the Intraday Liquidity Facility (ILF) without cost, provided the borrowed funds are repaid on the same day.
Duke also highlighted the retention of a 5% penalty for participants who fail to settle their ILF on time. In such cases, the system will automatically convert the unsettled ILF into an SLF at a penal rate of 36.75%. The CBN has also reintroduced collateral execution, meaning that instruments pledged by participants will be rediscounted by the central bank at the penal rate as outlined in the approved repurchase agreement (repo) guidelines.
This policy adjustment is expected to provide more flexibility in the financial system, allowing banks to manage their liquidity needs more effectively while adhering to the stricter lending terms imposed by the central bank.
The move comes as part of the CBN’s ongoing efforts to maintain monetary stability and ensure the smooth functioning of Nigeria’s banking sector amidst challenging economic conditions.
