Deposit Money Banks (DMBs) have used the Central Bank of Nigeria (CBN) Standing Lending Facility (SLF) to secure funds for operation.
A standing lending facility is a means by which central banks offer short-term liquidity to banks experiencing temporary funding shortfalls.
Data from the CBN on Thursday, July 4, 2024, revealed that Nigerian banks borrowed N1.53 trillion in a single day, marking an all-time high.
This amount represents an increase of over 100% compared to the N11.13 billion borrowed on the same date in 2023.
BusinessDay reports that banks may need to borrow from the CBN to meet immediate obligations, such as covering withdrawals or funding loans.
Banks rely on liquidity to facilitate transactions efficiently.
Analysts attribute this need for Short-Term Liquidity Facility (SLF) borrowing to recent adjustments in monetary policy by the Central Bank, including increased interest rates and tightened credit conditions.
These policy changes have heightened banks’ reliance on Central Bank lending for funds.
In its February 2024 Monetary Policy Committee (MPC) meeting, the CBN raised banks’ Cash Reserve Ratio (CRR) from 32.5% to 45.0%.
Additionally, in March 2024, it adjusted the CRR for Merchant Banks from 10% to 14%.
Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank.
TimesNow.com.ng previously reported that the CBN released six new directives on how domiciliary bank accounts should operate in the country.
The move aims to promote transparency, discourage speculation, and ensure overall stability in the forex market.
Access, Zenith, and Guaranty Trust, among several other commercial banks, are expected to make the necessary adjustments.
Proofreading by James Ojo Adakole, journalist and copy editor at TimesNow.com.ng.
Source: TimesNow.com.ng
