Banks’ borrowing from CBN rises 140% on N10.35trn liquidity
By Sodiq Adelakun
Amid liquidity crunch in the banking sector, banks in Nigeria are increasingly relying on the Central Bank of Nigeria, CBN, for liquidity as their borrowings from the apex bank intensifies.
Data from CBN shows that within the first half 2023, H1’23, which ended last weekend, the banks borrowed N10.35 trillion from the CBN’s Standing Lending Facility, SLF, a whopping 140 percent year-on-year (YoY) rise from N4.3 trillion in the corresponding period of 2022, H1’22.
The data shows that the first quarter figure, at N4.95 trillion, had already outstripped the half year 2022 figure while the subsequent borrowing further increased the reliance by 5.05 percent to N5.4 trillion in second quarter, Q2’23.
The data also shows that banks’ deposits in the apex bank Standing Deposit Facility, SDF, deteriorated by 2.0 percent in the Q2’23 to N898.25 billion from N1.36 trillion in Q1’23.
However, the combined impact of the two quarters in the H1’23 was a 34 percent rise in the banks’ SDF balances with CBN.
The rise in banks’ borrowings from the SLF reflects the continuous rise in currency outside banks and currency in circulation (CIC) in the economy.
The CBN’s currency redesign measures between Q4’22 and Q1’23 had pushed liquidity into the banks with huge rise in banks’ liquidity while CIC recorded drastic decline.
But with the suspension of the policy in Q1’23 the liquidity movement reversed.
However, in the CBN Communique No. 148 of the 291st Meeting of Monetary Policy Committee, MPC, with members personal statements held in May, 2023, Mrs. Aishah Ahmad, an MPC member, said that the banking industry soundness indicators remain strong as of April 2023, with capital adequacy ratio at 12.8 per cent, non-performing loans ratio at 4.4 per cent (from 5.3 per cent in April 2022) and liquidity ratio at 45.3 per cent (above the 30.0 per cent minimum) even as credit to the real sector continued to grow.
She added: “Stress test results showed that industry solvency and liquidity positions could withstand mild to moderate shocks in the short to medium term.
“Nonetheless, the sector must continue to build adequate capital buffers; ongoing implementation of the Basel III capital standards (which prescribes additional capital buffers) are relevant in this regard.”
