By Daniel Edu
Recent data from the Central Bank of Nigeria (CBN) reveals a substantial increase in banks’ reliance on the apex bank for liquidity. Banks’ borrowing from the CBN’s Standing Lending Facility (SLF) experienced a significant month-on-month (MoM) surge of 559%, reaching N376.64 billion in November compared to N57.14 billion in October 2023.
According to the CBN’s financial data for November 2023, deposits made by banks in the apex bank’s Standing Deposit Facility (SDF) saw a MoM decline of 18%, falling to N2.4 trillion in November from N2.94 trillion in October.
The CBN offers two short-term lending windows for banks and merchant banks, namely the SLF and Repurchase (Repo) lending.
The fluctuating trend in banks’ borrowing from the CBN throughout the year suggests ongoing challenges in maintaining liquidity within the banking system. The decrease in banks’ liquidity can be attributed, in part, to a reduction in cash deposits by customers, leading to a scarcity of cash in banks.
The CBN has acknowledged reported instances of cash scarcity in major cities across the country and has attributed this to the hoarding of banknotes by unspecified individuals. The Acting Director of Corporate Communications at the CBN, Mrs. Hakama Sidi Ali, stated that the currency in circulation increased from N1 trillion in February 2023 to over N3.4 trillion recently.
In response to the cash scarcity, the CBN suspended charges on cash deposits exceeding regulatory limits of N500,000 for individuals and N3 million for corporate account holders until April 30th, 2024. This move is aimed at addressing challenges associated with the shortage of physical currency and ensuring the smooth flow of transactions.
