Banks Borrowed N1.4trn From CBN In July

Deposit Money Banks (DMBs) in the country borrowed the sum of N1.4
trillion from the Central Bank of Nigeria (CBN) through the Standing
Lending Facility (SLF) window in July this year, the apex bank has
disclosed.

The CBN stated this in its Economic Report for July
2019 released at the weekend, adding that it granted total Standing
Deposit Facility (SDF) of N1.2 trillion to DMBs during the same period.

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While
the SLF is a window through which DMBs borrow funds from the CBN to
enable them to meet their short-term cash needs, the SDF provides a
window for the lenders to place their surplus cash with the regulator
with interest.

According to the banking watchdog, DMBs made more visits to its SLF window in July.

It
stated: “The trend at the CBN standing facilities window showed more
patronage at the Standing Lending Facility (SLF) window. Applicable
rates for the SLF and Standing Deposit Facility (SDF) remained at 15.50
per cent and 8.50 per cent, respectively.

“The total SLF granted
during the review period was N1,372.95 billion (inclusive of Intra-day
Lending Facility (ILF) converted to overnight repo). Daily average was
N68.65 billion in the 20 transaction days in July 2019. Total interest
earned was N994.80 billion.

“The total SDF granted during the
review period was N1,165.82 billion with a daily average of N1.30
billion in the 19 transaction days. Daily request ranged from N9.00
billion to N154.30 billion. Cost incurred on SDF in the month stood at
N0.35 billion.”

New Telegraph’s analysis of data obtained from
the CBN shows that DMBs borrowed N11 trillion from the CBN through the
SLF in the first five months of this year.

Specifically, a review
of the apex bank’s economic report for Q1 2019 as well as its economic
reports for the months of January, February, April and May 2019,
indicate that while DMBs borrowed N11.02 trillion through the SLF
window, the total SDF granted them by the CBN during the period amounted
to N5.7 trillion.

The CBN has not released its economic report
for the month of June. However, when figures obtained from its July 2019
economic report are added to those from the reports for the first five
months of this year, they show that for the six months under review,
DMBs borrowed a total of N12.42 trillion from the banking sector
regulator through the SLF while the total SDF granted them during the
period amounted to N6.9 trillion.

Analysts point out
that the DMBs would continue to be frequent visitors at the SLF window
for as long as the CBN continues with its tight monetary policy stance.
In fact, with softening oil prices leading to a decline in the nation’s
external reserves in recent weeks, the general prediction is that the
CBN could adopt further tightening measures as a way of attracting
foreign portfolio capital investors.

However, while DMBs’ visits
to the SLF window are heading north, there are indications that lenders’
placements at the SDF window are heading south. Indeed, compared with
the data in the economic report for May, total SDF granted by the CBN in
July declined.

In its May 2019 economic report, the CBN had
stated that: “The total SDF granted during the review period was
N1,813.90 billion, with a daily average of N100.77 billion in the 18
transaction days. Daily request ranged from N24.75 billion to N144.10
billion. Cost incurred on SDF in the month stood at N0.59 billion.”

In
its July report, however, the apex bank disclosed that: “The total SDF
granted during the review period was N1,165.82 billion with a daily
average of N1.30 billion in the 19 transaction days. Daily request
ranged from N9.00 billion to N154.30 billion. Cost incurred on SDF in
the month stood at N0.35 billion.”

Analysts attribute the drop in
SDF placements by DMBs in July partly to the implementation of the
CBN’s decision to peg DMBs’ remunerable daily placements at the SDF at a
maximum amount of N2 billion and that it would not pay interest on any
deposit by a lender that is above the N2 billion.

The decision,
along with an earlier CBN directive mandating DMBs to give out a minimum
of 60 per cent of their deposits as loans with effect from September
30, 2019 or face sanctions, were part of fresh measures recently
unveiled by the regulator to help boost economic growth by unlocking
credit, especially to the real sector.

Meanwhile, according to
the economic report for July 2019, DMBs’ credit to the domestic economy
increased by 0.6 per cent to N21,073.7 billion at end-June 2019,
compared with the level at the end of the preceding month.

The
report further stated that: “Total assets and liabilities of the banks
amounted to N39,623.4 billion at end-June 2019, showing a 0.2 per cent
increase, compared with the level at the end of the preceding month.

“Funds were sourced, mainly, from foreign liabilities, mobilisation of time, savings and foreign currency deposits and reduction in claims on Central Bank. The funds were used mainly, to acquire foreign assets, shore up capital accounts and pay off demand deposits.”

Source:- Newtelegraphonline

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