Banks Borrow N504 bln to Ease Liquidity Pressures
Some Nigerian banks pitched their tents at the standing lending facility (SLF), raised about N504 billion in October last year, according to Central Bank (CBN) report to meet funding and regulatory demand.
In part, CBN debits on banks for failing to meet its 65% loan to deposit ratio continue to impact lenders’ liquidity position. Sterilised funds have trended higher since the apex bank initiated loan to ratio proportion a few years ago.
CBN lending to local banks had peaked in the pandemic period, while stakeholders expect pressure to ease, it worsen due to serial CRR debits. Read: CBN’s Lending to Deposit Money Banks Hits 2020 High
While the apex bank failed to disclose affected banks in the report, a slew of analysts that spoke with MarketForces Africa pointed at a weak liquidity position among Tier-2 lenders in the country.
Analysts explain further to MarketForces Africa that healthy banks are allowed to borrow to meet short term liquidity shortages at the window at minimal rates.
According to CBN, lending activity dominated at the standing facility window, reflecting liquidity constraints in the segment.
In October, Standing Lending Facility (SLF) during the month was ₦503.69 billion, comprising ₦337.78 billion direct lending facility window and ₦165.92 billion Intra-day Lending Facility (ILF) converted to overnight SLF.
The ILF segment provides overnight liquidity to banks to meet requirements, according to analysts.
However, CBN reported that daily requests ranged from ₦0.10 billion to ₦108.20 billion and averaged ₦13.58 billion in the 15 transaction days, while total interest earned was ₦0.28 billion.
Meanwhile, it was noted in the report that the total request for the SLF in October 2021 represents a 31.7 per cent decline, compared with ₦737.72 billion in the preceding month.
On the other hand, the total Standing Deposit Facility (SDF) during the review period was ₦112.56 billion, with a daily average of ₦7.03 billion in 16 transaction days, while the cost incurred on SDF stood at ₦0.02 billion.
The deposit window allows banks with excess liquidity to lend to the apex bank. CBN said in the report that the SDF for the month under review was 43.8 per cent lower than the value in the previous month which printed at ₦200.35 billion.
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source https://dmarketforces.com/banks-borrow-n504-bln-to-ease-liquidity-pressures/