Reports from the Central Bank of Nigeria (CBN) have shown that the total money borrowed by commercial banks through the Standing Lending Facility (SLF) rose to ₦16.94 trillion in October 2024. This is contained in the CBN’s Economic Report, October 2024.
According to the report, the increased activities in the SLF window, that is, the increased lending, reflect the liquidity levels of the banking sector. This suggests that commercial banks may be experiencing lower liquidity rates.
By the report, the total transactions at the SLF window, which stood at ₦7.95 trillion in September witnessed a daily average lending activity of ₦8.1 billion, accounting for the increase to ₦16.94 trillion. In September, the average daily lending activity was ₦0.40 trillion.
An increase in lending activities led to a decline in the Standing Deposit Facility (SDF), which witnessed a decline to ₦3.01 trillion. In the preceding month of September, the total transactions at the SDF window was ₦4.48 trillion. Commercial banks’ daily average deposit for October was ₦1.4 billion, a figure relatively low compared to the ₦2.2 billion daily average savings recorded in September.
The CBN also traded government securities within the period to stabilise the economy. The total amount offered, subscribed, and allotted via Open Market Operations (OMO) was ₦3.23 trillion, ₦4.08 trillion, and ₦4.08 trillion respectively, as against ₦1.50 trillion, ₦1.18 trillion, and ₦0.72 trillion recorded in September.
Some of the reasons the CBN gave for the high SLF were SLF repayment, Cash Reserve Ratio (CRR) debits, OMO sales, Nigerian Treasury Bill (NTB) sales and FX-OMO swap settlement.
Another reason that can be deduced from the current economic environment to be responsible for the high SLF is reduced cash deposits in banks as a result of the high cost of food, goods and necessities as well as the reluctance of customers to deposit money in banks.
The high inflation rates mean that rather than save or deposit money in banks, customers are forced to purchase necessities with their available cash, oftentimes with no balance which can be saved.
The persistent cash crunch and reluctance of banks to abide by CBN’s cash distribution directives have also made bank customers wary of depositing money in banks. As a result, banks will not be able to deposit excess cash at the SDF. Rather, they are forced to borrow to take care of temporary liquidity deficits.
