Concerns as Access, GTBank, Zenith, Other Banks’ Borrowing from CBN Hit N57 Trillion in 1 Week

• Commercial banks have increased their borrowings from the Central Bank of Nigeria (CBN) in the past week
• Data from the CBN shows that banks’ borrowing from the apex bank skyrocketed by 245% to N57.5 trillion in one week
• The figure represents a yearly increase of 202% from N1.78 trillion borrowed by the banks in the first week of July 2023

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.

Commercial banks’s borrowing from the Central Bank of Nigeria (CBN) in the first five days of July hit a high of N5.38 trillion.

The figure represents a 245% increase from the N1.56 trillion borrowed by banks in the first five days of June 2024.

Commercial banks face cash shortages

According to data from the CBN, the amount represents a 202% annual increase from the N1.78 trillion borrowed by the banks in the first week of July 2023.

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The Standing Lending Facility (SLF) is one of the ways the apex bank makes cash available to the banks.

The banks might face slight liquidity shortages and need to borrow from the CBN to meet immediate demands, such as withdrawals or loan financing.

Legit.ng reported that the apex bank raised its benchmark interest rates by 750 basis points to 26.25% in May 2024, from 18.75% in July 2023, to control inflation, currently at 33.95% as of May 2024.

According to reports, the CBN has issued over N1.5 trillion in Open Market Operation (OMO) bills since Olayemi Cardoso became its head.

Analysts say banks operate on money and often need funds to finance transactions.

Regarding banks' deposits with the CBN, known as Standing Deposit Facility (SDF), deposit money banks (DMBs) deposited N172.17 trillion in the first week of July 2024, a decline from the N232.18 billion deposited in the same period in 2023. 

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Banks increase interest rates on savings accounts

Reports say the apex bank lifted the N2 billion daily limit on funds placed at the SDF window, leading to an increase in banks' net deposits over the past year. 

The development comes amid an increase in savings interest rates by commercial banks.

Banks increased their deposit interest rates to reflect the latest Monetary Policy Rate announced by the Central Bank of Nigeria. 

Checks showed that 18 Nigerian banks now offer their customers at least 7.88% interest on their deposits as of June 28, 2024. 

This exceeds the 5.55% average interest offered as of June 2023. 

CBN reacts to Dangote's high-interest rates comments

Legit.ng earlier reported that Olayemi Cardoso, the governor of the Central Bank of Nigeria, has said that the bank will soon reduce the growth rate in the benchmark interest rate.

Cardoso made this statement on Saturday in Lagos during the book launch of Ray Echebiri's book, "The Power of One Man: How the Soludo-Engineered Consolidation Transformed Nigerian Banks to Global Players."

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Nigerian banks search for cash, rush to CBN, borrow over N1trn in hours

Maintaining higher interest rates is critical to reducing the risk of hyperinflation and its aftereffects, according to the CBN governor, who was represented by Phillip Ikeazor, the deputy governor of financial stability.

Proofread by Kola Muhammed, journalist and copyeditor at Legit.ng

Source: Legit.ng