Banks’ Borrowing from CBN Plummets 76% as Deposits Surge by 270%

Sharp Decline in CBN Borrowing

Banks’ borrowing from the Central Bank of Nigeria (CBN) through the Standing Lending Facility (SLF) saw a dramatic drop of 76.4% month-on-month (MoM), falling to N4.04 trillion in August from N17.12 trillion in July.

Surge in Deposits Reflects Idle Funds

Conversely, banks’ deposits in the CBN’s Standing Deposit Facility (SDF) surged by 270.7% MoM, skyrocketing to N8.12 trillion in August from N2.19 trillion in July. This sharp increase suggests that banks are holding onto idle funds, with businesses refraining from borrowing due to the recent hikes in borrowing rates following the CBN’s Monetary Policy Rate (MPR) adjustments.

CBN’s Strategy to Boost Lending

These shifts align with the CBN’s recent strategy to discourage banks from hoarding excess liquidity and to encourage more lending. The central bank raised the rates for both the SLF and SDF, making it less attractive for banks to park their funds at the CBN.

Key Policy Changes

Following the 296th Monetary Policy Committee (MPC) meeting, the CBN adjusted the Asymmetric Corridor around the MPR to +500/-100 basis points, increasing the SLF rate to 31.75%. The SDF rate for deposits up to N3 billion was hiked to 25.75%, while deposits exceeding N3 billion now attract a rate of 19%.