Banks’ borrowing from CBN rises 215% to N19.5tr

BANKS’ borrowing from the Central Bank of Nigeria’s, CBN, rose by 215 percent year-on-year (y/y) to N19 trillion in 2019 from N6.2 trillion in 2018. Banks borrow from the CBN through its Standing Lending Facility, SLF, while they use the Standing Deposit Facility of the regulator for deposit placement.

Financial Vanguard analysis of the activities of the SLF and SDF in 2019 as contained in the CBN’s Quarterly Economic Reports showed that banks borrowed N8.4 trillion in the first quarter of 2019 (Q1’19), representing 127 percent increase when compared with N3.7 trillion borrowed in Q4’18 However, banks’ borrowing from the CBN dropped by N4.8 trillion or 57 percent to N3.6 trillion in Q2’19 from where it ticked up by N2.6 trillion or 72 percent to N6.2 trillion in Q3’19.

This trend was reversed in Q4’19, when banks’ borrowing fell by N4.9 trillion or 377 percent  to N1.3 trillion. Meanwhile, the CBN earned N776.51 billion interest payment from banks in 2019, indicating 8,866 percent increase when compared to N8.9 billion earned as interest in 2018. Analysis of the report showed that in Q1’19, CBN’s interest earning from the SLF rose by 310 percent to N2.54 billion from N62 million in Q4’18.

Similarly, in Q2’19, the apex bank’s interest earning from SLF rose slightly by four percent to N2.63 billion and up by 36 percent to N4.21 billion in Q3’19. The upward trend continued in Q4’19 where the regulators interest earning from the SLF rose by 18,121 percent to N767.13 billion.

On the other hand, banks’ deposit placement with the CBN through the SDF fell to N11.88 trillion in 2019, while the interest payment by the apex bank on deposits dropped to N1.93 billion.. Financial Vanguard analysis of the activities of SDF in 2019 showed that deposit  placement by the banks declined by N8.4 trillion or 41 percent to N11.88 trillion from N20.28 trillion in 2018. Quarterly analysis showed that deposit placement dropped by N1.4 trillion or 34 percent to N2.92 trillion in Q1’19 from N4.4 trillion in Q4’18. It, however, spiked by N2.06 trillion or 71 percent to N4.98 trillion in Q2’19 but  dropped by N2.88 trillion or 58 percent to N2.1 trillion in Q3’19.

The downward trend continued in Q4’19 when deposit placement by the banks fell by N200 billion or 10 percent to N1.9 trillion. However, the interest paid by CBN dropped by N5.6 billion or 78 percent to N1.93 billion in 2019 from N7.15 billion in 2018. Quarterly analysis showed that in Q1’19 interest paid by the CBN dropped by 37 percent to N99 million from N1.56 billion in Q4’18. In Q2’19, interest paid by the apex bank rose by 72 percent to N1.7 billion and down in Q3’19 by 63 percent to N63 million. The downward trend however reversed in Q4’19 as the interest payment incurred increased by five percent to N66 million.

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According to the CBN Q4’19 report: “The banks continued to access the CBN’s Standing Facilities to square up their positions either by borrowing from the standing lending facility (SLF) or depositing their excess liquidity at the standing deposit facility (SDF) of the CBN at the end of each business day. “Total request for the Standing Lending Facility (SLF), inclusive of direct SLF (N949.91 billion) and Intra-day lending facilities -ILF (N352.64 billion) that were converted to overnight during the review quarter, stood at N1.3 trillion, compared with N6.2 trillion in the preceding quarter.

“Daily average transaction value amounted to N23.26 billion in 56 transaction days, with total interest earned at N767.13 billion, compared with the daily average of N100.05 billion in 62 transaction days, with a total of N4.21 billion, as interest earned  at the end of the preceding quarter. “Total standing deposit facility (SDF) granted during the review period was N1.9 trillion, with daily average of N32.20 billion, compared with N2.1 trillion, in the third quarter of 2019. The cost incurred on SDF in the review quarter amounted to N66 million, compared with N63 million in the preceding quarter.”

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