“We Cannot Continue”: Access Bank, Zenith, GTB, Others Borrow N8.7trn From CBN to Meet Demands

• In the first two months of the year, Nigerian banks borrowed N8.7 trillion from the Central Bank of Nigeria
• This was triggered by the need for the banks to fulfil their ongoing business commitments amid CBN’s tightening liquidity
• Analysts regarded the development as a negative one, adding that more tightening will affect the economy

Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.

Deposit money banks and merchant banks borrowed an incredible N8.7 trillion from the central bank in the first two months of 2024.

Compared to the N982 billion the banks drew from the CBN in the first two months of 2023, this is a 787% Year-on-Year (YoY) increase.

ThisDay reported that the banking institutions' attempt to fulfil their ongoing business commitments led to borrowing.

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Analysts told the agency that this became necessary due to the Central Bank of Nigeria's (CBN) persistent drive to mop up liquidity.

Further Breakdown of the loan

Analysis of the CBN-released data showed that, in February 2024, banks' borrowing from the central bank through the Standing Lending Facility (SLF) grew due to the double-digit rate of inflation, foreign exchange shortages, and liquidity mop-up by the top banking regulatory authority.

Banks and commercial banks usually get liquidity through the SLF, a short-term lending window, to support their ongoing business activities.

The data showed that banks and merchant banks borrowed N2.75 trillion in January 2024, up 419.95% year over year from N528.2 billion borrowed in January 2023.

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In February 2024, they borrowed N5.97 trillion, up 1,215% year over year from N453.7 billion borrowed in February 2023.

According to Dr. Muda Yusuf, Chief Executive Officer of the Center for Promotion of Private Enterprises (CPPE), the trend reflects the liquidity pressure that certain banks are experiencing. He mentioned that the facilities are usually temporary.

He said:

“This may not necessarily indicate that the banks are stressed or unstable. Meanwhile, the recapitalisation of banks is long overdue. The minimum capital requirement of N25 billion is no longer adequate if discounted for inflation.”

Vice President of Highcap Securities, David Adnori, said:

“The development points to a lack of liquidity on the part of banks. Monetary policy has been tightening and this has led to low liquidity. It is cheaper for banks to borrow from the CBN. This development is not positive but negative. We cannot continue to tighten because it will reflect economic growth.”

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Nigeria’s external reserves rise by 2.83%

Legit.ng reported that Nigeria’s external savings recorded a 2.83% yearly rise following increased inflows from foreign capital remittances.

According to data from the CBN, foreign currency reserves rose to $34.11 billion as of March 7, 2024, from $33.17 billion at the beginning of the year.

External reserves are a country's central bank's foreign currency and other assets. They are typically made up of foreign currencies, gold, and other international assets.

Source: Legit.ng