CBN Loans to Banks Rise 79% to $269.6bn

Records show that Nigerian banks have borrowed N12 trillion from the Central Bank of Nigeria (CBN) in the past eight months. The CBN data showed that money borrowed from the apex bank from January to August was exactly N12.46 trillion.

The amount shows a year-on-year increase of 79% when compared with the record for the first eight months of 2022, which was N6.96 trillion. This record shows that borrowing costs have risen by 75% due to liquidity challenges.

The rate of intensive borrowing by commercial and merchant banks from the CBN was due to an increasing reliance on the apex bank for liquidity.

Additionally, the increase in borrowing in the first months of 2023 was attributed to the CBN’s new Naira note policy, a development by the Buhari administration to address the issue of election malpractice. However, this policy led to a cash crunch that affected Nigerians during the first months of 2023.

Quarter-on-quarter (QoQ) details of SLF in the CBN Financial data that covers January to September 2023 showed that banks borrowed N558.5 billion from the apex bank at the end of Q1 2023 and declined by 90% to N55.3 billion at the end of Q2 2023, showing stability in financial system liquidity during this period.

It also showed that banks that borrowed from the Standing Liquidity Facility (SLF) rose by 387% to N269.6 billion in Q3 2023.

Despite the development, the apex bank’s July 2023 Monetary Policy Committee (MPC) meeting communiqué stated: “In the banking system, Financial Soundness Indicators (FSIs) remained stable and strong.

“The Capital Adequacy Ratio (CAR) stood at 11.2 per cent, Non-Performing Loans (NPLs) ratio of 4.1 per cent and Liquidity Ratio (LR) of 48.4 per cent, as of the end of June 2023,” Vanguard reported.

Also, the CBN Money and Credit Statistics data for August 2023 shows that bank credit to the government increased month-on-month (MoM) by 0.62% from N32.5 trillion in August to N32.3 trillion in July.

The data also showed that banks’ loans to the private sector increased MoM by 1.1% to N54.7 trillion from N54.1 trillion.