Banks Borrow N11trn from CBN for Urgent Short-Term Needs

By Modupe Gbadeyanka

About N11.01 trillion was borrowed by deposit money banks (DMBs) from the Central Bank of Nigeria (CBN) for urgent short-term needs in 2022 compared with the N13.01 trillion taken in 2021 for the same purpose, according to The Guardian.

This showed a decline of 15.3 per cent year-on-year in the CBN short-term loans taken by the lenders through the Special Lending Facility (SLF) as they worried less about liquidity in the year.

Business Post reports that last year, as part of efforts to control rising inflation, the CBN increased the cash reserve ratio (CRR), which is the percentage of customers’ deposits with the central bank, to 32.5 per cent from 27.5 per cent.

Recall that in 2021, the SLF surged by 163 per cent after the economy almost came to a halt due to the COVID-19 pandemic of the preceding year, but as things gradually stabilised, it dropped last year.

It is not too certain if the apex bank will lower the CRR this year as it gradually loosens its monetary policies.

In 2022, the bank embarked on aggressive rate hikes like its peers around the world to combat inflation, which surged to 21.47 per cent in November, according to the National Bureau of Statistics (NBS).

This forced the CBN, through its Monetary Policy Committee (MPC), to raise the key interest rate to 16.50 per cent, with the asymmetric corridor retained at +100/-700 basis points around the MPR and the liquidity ratio left at 30 per cent.

In the financial data obtained by The Guardian, it was also disclosed that the overnight savings of banks via the Special Deposit Facility (SDF) window marginally increased by 5.7 per cent to N3.2 trillion N3.0 trillion in 2021, leaving the net value of CBN’s lending to banks at N7.8 trillion.