Banks borrow N27.5tn from CBN in six months

OYETUNJI ABIOYE

The Deposit Money Banks in the country borrowed the sum of N27.5tn from the Central Bank of Nigeria through the Standing Lending Facility window of the regulator during the first six months of 2017, the CBN Financial Market Department report has showed.

This represents an increase of over 450 per cent over the N5tn the banks borrowed from the CBN in 2016.

The SLF is a window through which banks borrow funds from the CBN to enable them to meet their short-term cash needs.

On the other hand, the Standing Deposit Facility provides a window for banks to place their surplus cash with the CBN with interest.

The CBN Financial Market report noted that in the first half of 2017, standing facilities (SLF and SDF) were accessed by the banks to enable them to either meet their short-term liquidity needs or place surplus cash.

The report read in part, “The SLF was utilised by the banks in order to enable them to square up their positions after inter-bank market trading hours. Thus, the total SLF granted in the review period amounted to N27.466tn, out of which N20.629tn was the conversion from unsettled Intraday Liquidity Facility.”

According to the report, the patronage of the SLF reflected the cash flow position of banks during the first half of the year, as requests were at its lowest on January 2, 2017 with N83.61bn and at its highest on April 18, 2017 with N478.54bn.

In view of the 122 transaction days within the period, average daily request amounted to N225.14bn.

The CBN stated that the rates for the SDF and SLF remained at 9 and 16 per cent, respectively.

Consequently, the cumulative interest received on the facilities was N21.13bn at 16 per cent, the report noted.

“In comparison with the corresponding period of the previous year, the total SLF transactions amounted to N5.079tn, out of which N4.836tn was the conversion from the ILF. Thus, the patronage of the SLF reflected the liquidity position during the first half of the year,” the report stated.

The average daily request stood at N59.76bn, while the cumulative interest received on the facilities was N2.92bn at the applicable rates of 13 per cent and 14 per cent.

According to the CBN, the higher level of transactions over the corresponding period in 2016 was occasioned by the tight monetary operations in 2017.

The report further noted that the patronage of the SDF reflected the liquidity unease in the system as less funds were deposited compared with the corresponding period of the preceding year.

The reduced patronage was due to tighter monetary operations through increased Open Market Operation auctions.

The CBN Financial Market report further indicated that the foreign exchange interventions moderated the cash balances in the banking system.

“The total request for the SDF in the review period was N5.5tn, indicating a daily average volume of N45.54bn as against a total SDF of N12.6tn and a daily average of N102.42bn in the corresponding period of 2016. A further analysis of the transactions indicated that the highest amount of the SDF was N121.50bn on February 2, while the lowest was N0.30bn on March 20.

“Consequently, the interest paid on the SDF amounted to N1.99bn at the rate of nine per cent in the first half of 2017 as against N2.84bn at four per cent from January 1 to March 21 and seven per cent from March 22 to June 30, 2016,” the report stated.

According to the economic and financial experts, 2017 was a hard year for the banking system and the economy in general.

This, they said, put the banks in a tighter cash position, forcing them to borrow more funds from the CBN.

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