Banks’ Borrowing from CBN Down 47% as Analyst Predicts Continuous Decline

Nume Ekeghe

Data collated from the Central Bank of Nigeria (CBN) has shown that banks borrowing from CBN in August 2022 dropped by 47 per cent Month-on-Month (MoM) to N2.4 trillion compared with N4.5 trillion in July 2022. 

This is as analysts have predicted that with the recent increase in Monetary Policy Rate (MPR), banks would further down the line continue to be conservative in borrowing from CBN.

The CBN lend to banks through the Standing Lending Facility (SLF) at an interest rate of 100 basis points above the 14 per cent Monetary Policy Rate (MPR), it also lends to banks through the Repurchase (Repo) arrangement.

The financial data by CBN revealed that banks’ borrowing through the CBN’s SLF dropped by 27.4 per cent MoM to N1.06trillion in August from N1.46 trillion in July, whilst banks’ borrowing through Repo arrangement also dropped significantly in August by 55.8per cent MoM to N1.35trillion from N3.07trillion in July.

At the end of July Monetary Policy Committee (MPC), the Governor of CBN, Mr. Godwin Emefiele noted with concern the continued aggressive movement in inflation, even after the rate hike at its last meeting, and expressed its unrelenting resolve to restore price stability while providing the necessary support to strengthen the fragile recovery.

In his address, he said: “As regards the decision as to whether to tighten, loose or hold, Members were unanimous and so did not consider both loosening and retaining rates at existing levels at this meeting.

“This is because on loosening, the MPC felt it could worsen the existing liquidity condition in the economy and further dampen money market rate, necessary to stimulate savings and investment. Members also felt that loosening would trigger the weakening of the exchange rate which could pass through to domestic prices.”

While banks’ patronage on the CBN’s SLF is dropping, their deposits with the regulator increase in August. 

In August 2022, banks’ Standing Deposit Facility (SDF) stood at N143.2billion from N60.76billion deposited in July 2022.

Analysts noted that increasing deposit with CBN is against the backdrop of attractive interest rate. 

Commenting on this, Head, Financial Institutions Ratings at Agusto & Co, Mr. Ayokunle Olubunmi, said: “With the increase in MPR, obviously banks are also able to solicit more money, which is more money coming in from the private sector. And also the rise in MPR also means that the cost of borrowing from the CBN will also increase so as a bank, so you are also careful about accessing money at a higher rate.”

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