The Central Bank of Nigeria (CBN) has lifted the suspension on its Standing Lending Facility (SLF) for authorized dealers, a critical tool used by the apex bank to manage money supply and liquidity in the banking system. The move follows decisions made at the latest Monetary Policy Committee (MPC) meeting, which saw significant adjustments to monetary policy rates.
The Standing Lending Facility allows banks to borrow short-term funds from the CBN, helping them manage liquidity and meet their financial obligations. The suspension of this facility was lifted in response to recent monetary policy adjustments, specifically the increase in the upper corridor of the standing facilities to 5.00% from the previous 1.00% around the Monetary Policy Rate (MPR).
At its most recent meeting, the MPC raised the MPR to 26.75%, a move aimed at addressing inflationary pressures and stabilizing the economy. In alignment with this decision, the CBN has now allowed authorized dealers to resume accessing the SLF under updated terms.
In a circular issued by Omolara Duke, Director of the Financial Markets Department at the CBN, authorized dealers are now permitted to request access to the SLF through the Scripless Securities Settlement System (S4) between 5:00 PM and 6:30 PM. The SLF is now available at a rate of 31.75%, with an additional measure allowing dealers to access the Intraday Liquidity Facility (ILF) without cost, provided the funds are repaid on the same day.
The CBN also retained the 5.00% penalty for participants who fail to settle their ILF, which will then be converted to SLF at a rate of 36.75%. This penalty underscores the importance of maintaining liquidity and ensuring timely settlements within the financial system.
In a related update, the CBN announced that the Standing Facilities for banks have been adjusted, effective immediately. The SLF rate, used by banks to borrow short-term funds, has been increased to 31.75%, reflecting the higher MPR. Conversely, the Standing Deposit Facility (SDF) rate, applicable to deposits made by banks at the CBN, has been raised to 25.75%.
The circular also outlined specific rates for different types of banks. Commercial and Merchant Banks will receive 25.75% on deposits up to ₦3 billion, with any excess deposits earning a reduced rate of 19%. Payment Service Banks will similarly receive 25.75% on deposits up to ₦1.5 billion, with amounts beyond this threshold also attracting a 19% rate.
These adjustments by the CBN are part of its ongoing efforts to regulate the financial sector and stabilize the economy in the face of evolving challenges. The resumption of the SLF, along with the updated rates, is expected to provide banks with the necessary tools to manage their liquidity more effectively while supporting broader economic objectives.
