Banks take N338.5b CBN loan partly because of liquidity squeeze
By Jeph Ajobaju, Chief Copy Editor
Commercial banks took a total N338.5 billion loan from the Central Bank of Nigeria (CBN) in January in their scramble to plug funding gaps created in part by the CBN policy of squeezing their liquidity to fund government projects.
CBN monthly report on “Standing facilities window operation” for January, just released, shows that banks rely on Standing Lending Facility (SLC) and Deposit Lending Facility (DLF) of the regulator.
“Activities at the standing facility window during the period reflected improved banking system liquidity,” the CBN said.
“Total Standing Lending Facility contracted considerably by 52.4 per cent to N338.4bn from N711.54bn in December 2021, fallout of the improved banking system liquidity in the period.
“In addition, the activity at the inter-bank call segment contributed to the significant decline in SLF.
“Transactions at the Standing Deposit Facility increased by 7.0 per cent to N246.21bn from N230.22bn in the preceding month, further buttressing liquidity condition in the market.”
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Banks can’t lend their money kept by CBN
“The CBN is the bank of last resort, it is the only one authorised to print naira. The only bank that should not run dry is the CBN.
“They also control the banks by ensuring that the banks maintain some levels of deposits with the CBN,” explained Adebayo Adele, an industry expert and Lancelot Ventures Managing Director, per reporting by The PUNCH.
“The CBN, technically speaking, is bankers’ bank. All the banks bank with the CBN, they deposit money and also bank with the CBN and that is why the CBN is able to control the influx of the naira into the economy, regulate the interest rates, increasing Monetary Policy Rate and others.
“So they set the temple for the control of money. The CBN is the bankers’ bank, the bank of the last resort and the bank of the federal government.”
Cowry Asset Management MD/Chief Executive Officer Johnson Chukwu added that “the banks borrow from the CBN to meet their funding gap. The SDR and SLR also move regularly. But remember that the banks also keep money in the Central Bank.”
Association of National Accountants of Nigeria (ANAN) former President Sam Nzekwe said “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.
“They borrow money from the CBN when they don’t have where to borrow money from and they are short of cash. They borrow from the CBN and pay back.”
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