Access, Zenith, UBA, others reduce borrowing from CBN amid high interest rate

Amid the Central Bank of Nigeria's hike in interest rates, banks' borrowing from the apex bank dropped by 10.6% monthly in May to N10.9 trillion.

The CBN maintains two short-term lending windows for banks: the Standing Lending Facility (SLF) and Repo Lending.

How the banks borrow from CBN

The CBN lends money to banks via the SLF at an interest rate of 100 basis points above the Monetary Policy Rate (MPR) and also via the Repo arrangement, which involves purchasing banks' securities with the agreement to resell them at a specific date, usually at a higher price.

However, the apex bank accepts bank deposits via its Standing Deposit Facility (SDF) and pays an interest rate of 300 basis points below the MPR.

Data from CBN shows that banks' borrowing via the SLF declined to N10.9 trillion in May from N12.2 trillion in April 2024.

Vanguard reports that banks' borrowing from CBN has dropped for two consecutive months since January, when it increased by 268.7% from N976.29 billion in December 2023.

Also, banks' deposits with CBN via the SDF spiked monthly by 120% to N943.06 billion in May from N428.9 billion in April this year.

According to reports, the developments were caused by improved liquidity in the interbank money markets.

Banks release lending rates

The CBN disclosed that the average daily opening liquidity in the interbank money market increased by 47% monthly to N321.9 billion in May from N218.6 billion in April.

The development comes as the banks announced new lending rates after CBN's hike in interest rates.

Legit.ng previously reported that each bank's lending rate aligned with the CBN interest rate. Six lenders offer loans to some sectors at a rate below the benchmark interest rate.