Banks Cut Borrowing From CBN By 47%

Banks’ borrowing from the Central Bank of Nigeria, CBN, fell for the second consecutive month in February, by 47 percent to N666 billion, driven by further improvement in the level of liquidity in the interbank system.

On the other hand, the banks increased deposit of their idle funds with the CBN by 80 per cent to N489.05 billion in February.

Earlier in January, banks borrowing from the apex bank fell by 46 per cent to N1.3 trillion while their deposits rose by 29 per cent to N272 billion.

The CBN has two short term lending windows for banks, namely the Standing Lending Facility (SLF) and Repo (Repurchase) lending.

While the CBN lends money to banks through the SLF at interest rate of 100 basis points (bpts) above the Monetary Policy Rate (MPR), it also lends money to banks through Repo arrangement, which involves the purchase of banks’ securities with the agreement to sell back at a specific date and usually for a higher price.

On the other hand, the CBN accepts deposits from banks through its Standing Deposit Facility (SDF).

Analysis of data from the CBN showed that banks’ borrowing through Repo arrangement dropped significantly by 47 per cent, MoM in February to N480.35 billion from N952.79 trillion in January.

Similarly, banks’ borrowing through the CBN’s SLF fell sharply by 40 per cent, MoM, to N186.48 billion from N313.43 billion in January.

Consequently, banks’ borrowing from the apex bank through the SLF and Repo fell by 47 per cent, MoM, to N666.8 billion in February from N 1.266 trillion in January.

The two consecutive months decline in banks’ borrowing from the apex bank follows continued improvement in the level of liquidity (idle funds) in the interbank money market.

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