CBN Adjusts Interest Rate, Zenith, Access, GTB, Others Rush to Borrow N34 Trillion
- Between January and February 2025, commercial banks and Deposit Money Banks borrowed an estimated N33.97 trillion from the CBN
- The banks took this action to handle their day-to-day operations and interbank money market liquidity issues.
- The decreasing value of the naira on the foreign exchange market was attributed by experts to the expanding banks' borrowing from CBN
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Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.
Deposit Money Banks (DMBs) and commercial banks borrowed an estimated N33.97 trillion from the Central Bank of Nigeria (CBN) between January and February 2025 in order to manage their daily business operations and liquidity concerns in the interbank money market.
Source: Getty Images
Experts ascribed the growing banks' borrowing from CBN to the declining value of the naira on the foreign exchange market, the apex bank absorbing surplus liquidity in the financial sector, and the rising rate of inflation.
What the data says
The CBN's financial data shows that the N33.97 trillion borrowed in the first two months of 2025 is a 257.3 percent rise over the N9.51 trillion borrowed in the same period in 2024.
ThisDay reported that banks and commercial banks can get cash to support their daily operations through the CBN's Standing Lending Facility (SLF), a short-term lending window.
According to the CBN data, banks and merchant banks borrowed N9.16 trillion from the CBN in January 2025, which was 158% more than the N3.54 billion they borrowed in January 2024.
In February 2025, banks and merchants borrowed a total of N24.82 trillion through the SLF, which was a significant increase of 315.96 percent more than the N5.97 trillion they borrowed in February 2024.
Interest rate up
As the asymmetric corridor around the MPR at +500/-100 basis points, these financial institutions borrowed from the CBN in the first two months of 2025 at an interest rate of 32.50%.
As the Monetary Policy Committee (MPC) maintained the status quo on rates at its first MPR this year, the interest rate at which these banks and commercial banks borrow from CBN has remained unchanged in 2025.
As part of its mandate to address inflation and the uncertain value of the Naira in the foreign exchange market, the MPC members decided to raise the interest rate from 18.75 percent to 27.50 percent in 2024.
In a circular, Dr. Omolara Duke, Director of the Financial Markets Department at the CBN, said that while the MPR was at 26.75 percent, the apex bank permitted banks to borrow at a rate of 31.75 percent.
The SLF is available to banks via the Scripless Securities Settlement System (S4) between the hours of 5:00 and 6:30 p.m.
Furthermore, authorized dealers are allowed to use the Intraday Lending Facility (ILF) for free as long as the loan is paid back on the same day.
“Collateral execution (the rediscounting of instruments pledged by participants at the penal rate by CBN) is reintroduced as stipulated in the approved repo guidelines. “The circular takes immediate effect.”
Experts explained the growing banks' borrowing from CBN by pointing to the declining value of the Naira on the foreign exchange market, the apex bank absorbing surplus liquidity in the banking sector, and the rising rate of inflation.
Reacting, the Chief Executive Officer of the Centre for Promotion of Private Enterprises (CPPE), Dr. Muda Yusuf stated that,
“This is a reflection of liquidity pressure some of the banks are going through. The facility is typically short term.
“This may not necessarily indicate that the banks are stressed or unstable. Meanwhile, the recapitalisation of banks is long overdue. The minimum capital requirements of N25 billion are no longer adequate if discounted for inflation.”
Source: UGC
On his part, the Vice President of Highcap Securities, Mr David Adnori, said:
“The development points to lack of liquidity on the part of banks. Monetary policy has been tightening and this has led to low liquidity. It is cheaper for banks to borrow from the CBN. This development is not positive but negative. We cannot continue to tighten because it will reflect on economic growth.”
CBN says 95% of bank debtors took loans from microfinance banks
Legit.ng reported that new data from the Central Bank of Nigeria (CBN) shows that 95.66% of bank loans in 2024 originated from Microfinance banks.
The data, which captures loan transactions in September 2024, confirms the significant influence of microfinance banks on individuals and small businesses.
This figure marked a slight decline from the 6,573 loans recorded for MFBs the previous month and a bigger decline Year-on-Year from 8500 recorded in September 2023.
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Source: Legit.ng
