How banks borrowing from CBN rose to N3.33trn in February
Commercial banks borrowing from the Central Bank of Nigeria (CBN) through the Standing Lender Facility (SLF) increased in February to N3.33 trillion, higher than N3.23 trillion accessed in January, data obtained from the apex bank official website has revealed.
Generally, SLF is a central bank’s monetary policy instrument which can control market liquidity. It was created mainly for bank system’s need to ease short-term liquidity tight.
An applicable rate for SLF is 16 per cent in the review period and the rates are anchored on the Monetary Policy Rate (MPR), which remained at 14 per cent.
Although, the figure from the CBN website did not state the commercial banks involved there are strong indications that the funds are accessed mostly by weak Tier-2 and Tier-3 banks operating in the country.
But further checks showed that weaker banks repeatedly accessed the SLF to square-up their liquidity positions for a certain period.
The Head, Investment Research & Business Development, PanAfrican Capital Holdings Limited, Mr. Moses Ojo said liquidity challenge remained a bottleneck to commercial banks.
He maintained that high Non-Performing Loans (NPL) in the banking sector also contribute to commercial banks borrowing from the apex bank.
He maintained that commercial banks NPL has increased this year, stressing that the impact is affecting commercial banks liquidity position.
The CBN had divulged plans to introduce new capital rules for the banking sector in the second quarter of the year.
The apex bank stated that the new requirements will have stricter definitions of capital and will introduce capital conservation and countercyclical buffers, in line with the Basel III global accords.
According to Ojo, banks financing Oil & Gas and manufacturing sectors have an impact on them borrowing from CBN early in the year.
“The drop in NPL last year was not significant. The decline in NPL as a report by the National Bureau of Statistics (NBS) has no significant impact on liquidity position of commercial banks”, he added.
