Banks take N595.34b CBN loan in 2 months
By Jeph Ajobaju, Chief Copy Editor
Liquidity squeeze compelled banks to borrow N595.34 billion from the Central Bank of Nigeria (CBN) between January and February through Standing Lending Facility (SLF), according CBN monthly economic report.
A total N333.59 billion was borrowed in January but the amount slashed to N255.75 billion in February because of greater liquidity in the banking system.
“Subdued activities in the SLF window and the strong patronage at the Standing Deposit Facility confirm increased liquidity in the banking system. Activities at the standing facility window reflected ease in banking system liquidity during the review period,” the report said.
“The total SDF increased significantly by 60.79 per cent, to N472.38 billion, from N293.79 billion in January 2022. Conversely, transactions at the SLF decreased by 24.69 per cent, to N255.75 billion, from N339.59 billion in January 2022.”
Former Association of National Accountants of Nigeria (ANAN) President Sam Nzekwe said banks borrow from the CBN as a lender of last resort.
“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,” he explained.
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Increase in broad money supply
CBN Governor Godwin Emefiele has previously disclosed that the Monetary Policy Committed (MPC) noted the growth rate of broad money supply (M3) increased to 2.12 per cent in February 2022 versus 1. 74 per cent in January, per The PUNCH.
This was largely attributed to an increase in the growth rate of Net Domestic Assets (NDAs) to 5.78 per cent in February 2022 from 2.62 per cent in January.
Emefiele said: “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 per cent in February 2022 from 6.00 and 16.00 per cent in January 2022, respectively.
“The decrease in the rates reflected the liquidity conditions in the banking system.”