The Central Bank of Nigeria (CBN), borrowed financial institutions in the country no less than N595.34 billion between January and February 2022.
As seen in the CBN’s monthly economic report, while N333.59 billion was borrowed through the Standing Lending Facility (SLF) in January, the amount was reduced to N255.75 billion in February.
CBN, however, blamed the decreased amount on increased liquidity in the banking system.
“Subdued activities in the SLF window and the strong patronage at the Standing Deposit Facility (SDF) confirm increased liquidity in the banking system. Activities at the standing facility window reflected ease in banking system liquidity during the review period.
“The total SDF increased significantly by 60.79%, to N472.38 billion, from N293.79 billion in January 2022. Conversely, transactions at the SLF decreased by 24.69%, to N255.75 billion, from N339.59 billion in January 2022,” the report read.
Speaking on liquidity in the sector during the period after a Monetary Policy Meeting, the CBN Governor, Godwin Emefiele, had said members noted that the growth rate of broad money supply (M3) increased to 2.12% in February 2022, compared with 1. 74% in January 2022.
This was largely attributed to an increase in the growth rate of Net Domestic Assets to 5.78% in February 2022 from 2.62% in the previous month.
His words, “On the developments in the money market, the Committee observed the movement in money market rates around the asymmetric corridor, reflecting the prevailing liquidity conditions in the banking system.
“Accordingly, the monthly weighted average Open Buyback and Inter-bank Call rates decreased to 5.81 and 9.30% in February 2022 from 6.00 and 16.00% in January 2022, respectively. The decrease in the rates reflected the liquidity conditions in the banking system.”
Why do banks borrow from CBN?
While financial institutions keep their money with the apex bank, BizWatch Nigeria equally understands that they also borrow money from the CBN to bridge their funding gap.
A former President of the Association of National Accountants of Nigeria (ANAN), Dr. Sam Nzekwe explained that “the banks have to take from the CBN because it is the bank of the last resort. CBN is also keeping part of their money which they cannot lend.”