Lending facility to banks hits N9.85trn in 11 weeks
Lending facility from the Central Bank of Nigeria (CBN) to commercial banks operating in the country has hit the sum of N9.85 trillion in 11 weeks.
According to the Standing Lending Facility (SLF) figure which showed that the Deposit Money Banks(DMBs) had in January borrowed N3.54 trillion, with an average amount of N160.9 billion. The highest and lowest amount commercial banks borrowed from CBN in January was N184.7 billion and N83.6 billion respectively.
The SLF data further revealed an appreciable seven per cent to N3.29 trillion in February and in 13 days ended March 17, it moved to N3 trillion, even as for the first week in March, the CBN borrowed banks N651 billion in total sum, which moved to N1.13 trillion and N1.24 trillion in second and third week respectively.
While banks use the CBN’s SLF to support their liquidity shortfalls and meet trading obligations on short term basis, finance experts told our correspondents that CBN’s lending to banks had increased of recent on the heels of illiquidity in the economy.
A source at CBN disclosed that the N9.85 trillion is a cumulative figure, “SLF is like overnight borrowing at which those funds are returned the following day. It does not mean CBN borrow banks N9.85 trillion”, he said.
Commenting on the triggered borrowing of commercial banks from CBN, the Managing Director, Highcap Securities Limited, Mr. David Adnori, said, “When banks go to the CBN, it means they have some projects they want to finance but the funds are not enough. So, they access funds from the CBN through the SLF.
“When banks have undergone that project in days, they will start paying CBN principal and interest; that is how CBN makes its own income. The SLF is not meant to finance banks’ foreign exchange request. Banks are supposed to request foreign exchange on behalf of their customers but if banks are borrowing from CBN for themselves through the SLF, then that might lead to round tripping.
“With the increased borrowing in SLF, I want to think it is high time CBN organised a transparent and competitive foreign exchange market where the true state of naira will be determined. The CBN is still doing the allocation, which means Nigeria economy is yet to have a fair competitive market. It is the duty of the market forces to determine the price based on supply and demand.
“The CBN weekly allocation of foreign exchange is unfair. The market is not competitive. CBN still allocate foreign exchange to Bureau de Change (BDC) operators in a country manufacturers need foreign exchange allocation”, he further explained.
The apex bank last week, however, continued to intervene in the currency space, selling a total of $250 million in currency forwards on the interbank market through commercial lenders.
Aside the usual daily intervention of $1.5 million, the CBN also approved additional 10 BDC operators – bringing the total number to 3,124 – partaking in the weekly $25 million auction held by the International Money Transfer firm, Travelex, at N381 per dollar.
Meanwhile, as the economic fortune of the country begins a gradual turnaround for good, available credit from the financial market to the public increased in the first quarter of the year, a report by the Central Bank of Nigeria has revealed.
