Data reveals banks borrowed N131.42 trillion from CBN in 2024 to meet business obligations

• Nigerian banks borrowed N131.42 trillion from the Central Bank of Nigeria in 2024 to meet their business obligations
• Banks deposited N38.12 trillion with the CBN in 2024
• Analysts say increased banks’ borrowing from the CBN shows banks are confronted with liquidity pressures

Data released by the Central Bank of Nigeria (CBN) shows that deposit money banks (DMBs) and merchant banks borrowed N131.42 trillion from the apex bank in 2024 to meet their daily business obligations.

According to the data, the amount borrowed in 2024 is 636.6 per cent higher than the N17.84 trillion borrowed by Nigerian banks in 2023.

The data also showed that DMBs and merchant banks borrowed the highest amount of N21.74 trillion in March 2024 and the lowest amount of N2.9 trillion in January 2024.

The borrowing is due to the tight monetary stance of the CBN, which led to liquidity challenges for banks in the year, and low cash deposit by bank customers, leaving banks to battle with cash scarcity.

Banks borrowed from CBN using the Standing Lending Facility

To access lending from the CBN, DMBs and merchant banks make use of the Standing Lending Facility (SLF) window and deposit excess liquidity with the apex bank using the Standing Deposit Facility (SDF) window.

The SLF window is a short-term lending window provided by the CBN for banks and merchant banks to access liquidity to run their day-to-day business operations.

Following the CBN’s increase of the Monetary Policy Rate (MPR) six times in 2024 to 27.50 per cent, banks borrowed from the CBN at an interest rate of 32.50 per cent as the asymmetric corridor around the MPR is at +500/-100 basis points.

With the hike in the MPR to 18.75 per cent in June 2023, the applicable rates for the SDF and SLF in 2023 increased by 50 basis points to 11.50 and 19.50 per cent, respectively.

The CBN’s sustained increase of the MPR in 2024 changed the rates at which banks and merchant banks borrowed from CBN with each increase.

The apex bank allowed banks to borrow at a rate of 31.75 per cent in July 2024 when the MPR was at 26.75 per cent.

Banks deposited N38.12 trillion with CBN in 2024

The data also revealed that banks and merchant banks deposited N38.12 trillion with the CBN in 2024, a 210.15 per cent increase when compared to N12.29 trillion in 2023.

According to the data, the highest deposit from banks was N8.12 trillion recorded in August 2024.

The increase in banks’ deposits with the CBN was facilitated by the CBN’s lifting of suspension on the daily remunerable policy, which should not exceed N2 billion.

The apex bank also stated that the SDF deposit of N2 billion shall be remunerated at the interest rate prescribed by the Monetary Policy Committee from time to time and that any deposit by a bank above N2 billion shall not be remunerated.

Analysts say increased banks’ borrowing negative

Analysts have decried the increase in borrowing from the CBN by Nigerian banks to meet their daily business obligations, stressing that the situation signals the liquidity pressure confronting banks.

They said the situation has a negative colouration and urged the CBN to halt further hikes of the interest rate.

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.”

The Chief Executive Officer of the Centre for Promotion of Private Enterprises (CPPE), Dr Muda Yusuf, said the situation shows that banks are faced with liquidity challenges.

He said, “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.” 

CBN says Nigerians withdrew N365.38 billion in November 2024

Meanwhile, TheRadar earlier reported that the Central Bank of Nigeria (CBN) said Nigerians withdrew N364.38 billion from banks in November 2024 amid the cash scarcity witnessed in many parts of the country.

This is according to data from the Money and Credit Statistics of the CBN, which showed that currency outside banks increased to N4.65 trillion from N4.29 trillion in October, representing an 8.5 per cent month-on-month increase.