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Home Opinions Blurb

Banks borrow N19.64trillion from CBN in 2019

Titobioluwa Okunade by Titobioluwa Okunade
January 12, 2020
in Blurb, Business News, Politics, Spotlight
net interest income, Nigerian Banks, Fitch, Nigerian banks tremble over Cyber attack, Most Nigerian banks are very likely to fail stress tests should the economic downturn persists and deepens, What Banks can do to improve Real Sector Lending in 2021
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Commercial banks borrowed N19.64 trillion from the Central Bank of Nigeria in 2019, indicating a 73% increase from the N11.36 trillion borrowed in 2018. This was revealed in the apex regulator’s financial data report.

The banks through the apex’s bank Standing Lending Facility (SLF) window borrowed N7.43 trillion in the second half of 2019 against N4.5 trillion borrowed within the same period in 2018.

Meanwhile, the SLF window witnessed increased patronage compared to the decline in the Standing Deposit Facility (SDF) as commercial banks strive to meet the CBN’s 65% Loan to Deposit Ratio policy.

[READ MORE: Nigeria spends $1.31 billion to service external debt in 2019)]

What it means:

The SLF is a platform that commercial banks access funds to carry out their business activities and meet obligations. The SDF window is the portal where commercial banks deposit fund with the apex bank.

Experts say …

While some analysts have raised concerns following the rising threat of liquidity problems in the financial services sector, others warned that there is need for commercial banks and merchant banks to square-up their financial position in 2020.

Chief Economist/Head, Investment Research PanAfrican Capital Holdings, Moses Ojo, attributed the increase in the SLF to  the low liquidity of some commercial banks, noting that most tier-three commercial banks had borrowed heavily from the Central Bank to square up their daily business activities.

“The factors that accounted for this is mainly the low level of liquidity of some of the commercial banks in the country. While some of the operators have a strong liquidity base, while others are struggling. The operators in this category are mostly in the third-tier class in the banking sector.”

“The weaknesses in the liquidity base of these operators led them to seek cover from the regulator during the period.” Ojo said

A research analyst at Investment One Financial Services Limited, Abayomi Ajayi, also stated that the 73% increase in the SLF last year was due to the liquidity challenges in the sector.

“The increase may have been the impact of the prevailing liquidity conditions in the banking system witnessed in 2019. As we know, the CBN retained its tight stance on monetary policy in its bid to maintain price stability and check inflation.”

“Most of the lending from the CBN would have gone to tier II banks as they felt the brunt more during the period.” Ajayi said

 

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Tags: banksborrowborrowedCBNCentral Bank of NigeriaMoses OjoStanding Lending Facility

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