Bank Lending From CBN Rises 260% To N21.87tn

CBN Revokes Licenses Of 132 Microfinance Banks, Others

According to financial statistics released by the Central Bank of Nigeria (CBN), Deposit Money Banks borrowed N21.87 trillion from the Apex Bank in 2020 through the Standing Lending Facility window and Repurchase Lending platform.

When compared to the N5.744tn recorded via the same windows in 2022, this is a 260 percent increase. However, as compared to the N27.08 trillion the banks borrowed from the apex bank in 2021, it represents a 19.3% drop.

For banks and merchant banks, the apex bank offers two short-term lending options: the Standing Loans Facility (SLF) and Repurchase (Repo) lending.

While the CBN provides loans to banks and merchant banks through the SLF at an interest rate that is 100 basis points higher than the Monetary Policy Rate (MPR), it also provides loans to banks through the Repo arrangement, which entails the purchase of securities from banks with the promise to resell them at a later date and typically for a higher price.

According to the CBN’s financial data, bank and merchant bank borrowing through the SLF decreased by 14.25% to N11.15 trillion in 2022 from N13.01 trillion in 2021.

According to the SLF breakdown by month, the DMBs and merchant banks borrowed N313.48bn from the CBN in January 2022. But in February, it fell to N186.48 billion.

The apex bank’s financial information revealed that SLF data in March stood at N377.13bn and increased further by 62.4 per cent M-o-M to N612.43bn in April 2022.

For May, the CBN reported N897.05bn, after which the borrowing increased significantly to N1.93tn in June.However, the financial data by apex bank showed N1.46tn and N1.19tn for July and August 2022, respectively. In addition, the DMBs and merchant banks had borrowed N836.5bn in September; N464.07bn in October; N1.56tn in November and N1.33tn in December 2022.

Consequently, borrowing by the DMBs and merchant banks through the CBN’s Repo declined by 24 per cent to N10.7tn in 2022 from N14.07tn disclosed by financial data in 2021.

For Repo, the data by the CBN revealed N968.8bn in January but it dropped to N480.35bn in February. With nine Repo activities in March, a sum of N343.48bn was reported. It however increased to N474.83bn in April.

According to CBN data for other months, N1.197tn was borrowed in September, N1.197tn in October, N1.197tn in June, N1.65tn in June, N3.07tn in July, N1.62tn in August, and N870.32bn in May.

No Repo transactions were found in the financial data for November or December 2022.

Analysts have ascribed the fall to the banking system’s limited liquidity circumstances as the central bank boosts its monetary ratios to combat rising inflation.

Apart from the SLF and Repo, the CBN also takes bank deposits through its Standing Deposit Facility and pays an interest rate that is 700 basis points less than the MPR, which is now 16.5%. A 6.65% increase above the N3.03 trillion deposited in 2021, banks and merchant banks deposited N3.24 trillion with the CBN in 2022.

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