CBN bank borrowing reaches N12 trillion.

Given the increase in their borrowing from the apex bank during the final eight months of 2023, there are signs that commercial and merchant banks are becoming more and more reliant on the Central Bank of Nigeria for liquidity.

According to CBN data seen by our correspondent, commercial banks and merchant banks borrowed a total of N12.46tn from the CBN throughout the first eight months of this year, with the exception of August 2023, which ends this week.The financial institutions borrowed N6.96 trillion from the central bank in the first eight months of 2022, a 79% rise.

Through the Standing Lending Facility (SLF) window, commercial banks and merchant banks can obtain loans from the apex bank, and through the Standing Deposit Facility window (SDF), they can deposit money with the apex bank.The results show that banks used the SLF window in the first eight months of 2023 in response to the CBN’s tighter monetary policy stance.

The SLF, a short-term lending window provided by the top banking regulatory authority, allows merchant and commercial banks to obtain liquidity for daily operations.According to CBN statistics obtained by The PUNCH, commercial and merchant banks borrowed N10.25tn from the CBN between January and June of this year via the SLF window. This represents a 138% YoY increase from the N4.3tn borrowed during the similar period of H1 2022.

The first quarter amount, N4.95tn, was greater than the half-year data for 2022, according to CBN data.According to the monthly breakdown, commercial banks and merchant banks borrowed N528.16 billion from the CBN in January 2023; however, by February 2023, the amount had reduced to N453.7 billion.

It increased sharply by 776.22 percent in March to N3.98 trillion, the second-highest amount after the N4.47 trillion recorded in April 2023.But according to CBN data, borrowing for May and June of 2023 was N235.06 billion and N590.29 billion, respectively.Furthermore, in July and August, SLF’s figure was N908.43bn and N1.3tn, respectively.

Former Lagos Chamber of Commerce and Industry Director-General Dr. Muda Yusuf commented on the situation, saying, “This is a reflection of liquidity pressure some of the banks are going through.” Usually, the institution has a brief lifespan. This might not always mean that the banks are unstable or under stress.

In the meantime, bank recapitalization is long overdue. If inflation is taken into account, the N25 billion minimum capital requirements are no longer sufficient.