Banks’ Borrowings From CBN Drops By 93%

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Deposit Money Banks’ reliance on the loans from the Central Bank () fell sharply by 93 percent August, driven by surge idle cash (excess liquidity) the interbank money market.

Also reflecting the excess liquidity the system, banks’ deposit idle cash with the rose by 19 percent the same period.

The disclosed these in its monthly economic report for July and August 2020.

Banks borrow from the CBN through the Standing Lending Facility (SLF) while they place deposit with the apex bank through the Standing Deposit Facility (SDF).

According to the CBN’ report, banks’ borrowing through the SLF was N112.73 in August down from N1.57 trillion in July, translating to 93 percent decline.

However, banks’ deposit placement through the SDF rose to N441.65 in August from N370.92 in July, translating to 19 percent increase.

The CBN’ economic report stated: “Deposit Money Banks (DMBs) and merchant banks continued to access the Standing window to square liquidity positions in August 2020.

“The trend at the CBN standing window showed frequency at the Standing Deposit Facility (SDF) window, due to improved liquidity in the banking system.

“Banks took advantage the situation to scale up operations in the face the . Applicable rates for the SLF and Standing Deposit Facility (SDF) remained at 14.5 per cent and 7.5 per cent, respectively.

“The total request for the SLF granted, in August 2020, was N112.73 , made up of N83.30 direct SLF and N29.43 Intraday Lending (ILF) converted to overnight repo. The daily average was N9.39 billion in 12 transaction days from August 3 to 25, 2020. “Total interest earned at 14.5 per cent was N0.06 billion.

“The total SDF granted, during the review period, was N441.65 billion with a daily average of N25.98 billion in 17 transaction days from August 3 to 25, 2020. Daily requests ranged from N6.00 billion to N41.40 billion. The cost incurred on SDF in the month stood at N0.12 billion.”