In a noticeable trend, Nigeria’s commercial banks and merchant banks have been increasingly turning to the Central Bank of Nigeria (CBN) for liquidity, with their borrowing from the apex bank intensifying over the course of the first eight months of 2023.
Recent data from the CBN, accessed by our correspondent, has revealed that during the initial eight months of this year, which includes up to August 2023, these financial institutions collectively borrowed a substantial N12.46 trillion from the central bank. This figure starkly contrasts with the N6.96 trillion borrowed in the same period of 2022, marking a significant 79 percent increase.
These banks access the CBN’s liquidity through the Standing Lending Facility (SLF) window, which serves as a short-term lending avenue for commercial and merchant banks. Additionally, they deposit cash with the apex bank using the Standing Deposit Facility window (SDF).
Analyses suggest that this surge in borrowing during the first eight months of 2023 can be attributed to the Central Bank of Nigeria’s adoption of a more stringent monetary policy stance.
The CBN’s SLF window offers commercial banks and merchant banks the liquidity required to effectively operate their day-to-day business activities. Detailed CBN data accessed by The PUNCH newspaper indicates that from January to June this year, these banks borrowed a staggering N10.25 trillion via the SLF window—an impressive 138 percent Year-on-Year (YoY) surge compared to the N4.3 trillion borrowed during the same period in 2022.
The figures show a particularly remarkable increase in the first quarter of 2023, amounting to N4.95 trillion, surpassing the half-year data for 2022.
Further dissection of the data indicates a fluctuating borrowing pattern throughout the months. For instance, in January 2023, commercial and merchant banks borrowed N528.16 billion, which slightly decreased to N453.7 billion in February. In March, borrowing surged remarkably by 776.22 percent to N3.98 trillion, the second-highest figure after the N4.47 trillion recorded in April 2023.
Nonetheless, the data from the CBN also reveals borrowing figures of N590.29 billion and N235.06 billion for May and June 2023, respectively.
This trend underscores the pivotal role of the CBN’s liquidity provision in maintaining the financial operations of commercial and merchant banks, particularly in the face of evolving market conditions and monetary policies. As the borrowing trend continues, stakeholders will closely watch how banks navigate this reliance on the central bank’s liquidity support to sustain their day-to-day activities and maintain market stability.
