CBN borrowings from commercial banks down 0.45% to N1.35trn in Q1

BY CHARLES ABUEDE

A few years after Nigeria’s Central Bank initiated the Standing Deposit Facility (SDF) for Nigerian banks on a daily basis to deposit their excess liquidity with the nation’s apex financial institution, the activity trend of the CBN in the first three months of 2022 reveals that there has been a steady fall in total bank deposits.
The report shows that banks lending to the apex bank dropped marginally by 0.45 percent year on year to N1.35 trillion during the first quarter of 2022.

The decline by 0.45 percent, in comparison to N1.36 trillion reported by the banking sector regulatory body in the first quarter of 2021, was driven by further improvement in the level of liquidity in the interbank system.

According to the report, the total deposits by banks in January this year with the CBN were at N572.5 billion but declined by 48.2 percent to N489.05 billion in February. Similarly, March was no exception as the total borrowing by the apex bank dropped further to N296.8 billion.

However, in November 2014, the CBN said it observed that banks and discount houses preferred to keep their idle balances in the SDF with the apex bank while the total bank deposit applicable interest rate for the SDF is at 4.5 percent currently.

Unfortunately, this preference by the banks and discount houses contributed to the off-putting of the financial intermediation process, the reason the CBN opted to review the guidelines for the operation of the SDL. The review recommended that daily placements by discount houses and banks at the SDF should not exceed N7.5 billion.

Analysts have noted that the fact that the apex bank is implementing the discretionary CRR, banks were being careful in terms of sourcing for deposits because it may seem inappropriate for a bank to get deposits and then the CBN holds them in sterilisation.