Access, First Bank, UBA and Other Commercial Banks Search for Cash, Borrow Billions from CBN
- Nigerian banks have secured about N240.57 billion from the Central Bank of Nigeria.
- Data from the CBN shows that the banks borrowed over N240 billion to fund their operations
- Banks borrow from CBN through the Standing Lending Facility (SLF), an instrument of liquidity management
Deposit Money Banks(DMBs), including Access Bank, First Bank, and United Bank of Africa, have used the Central Bank of Nigeria (CBN) Standing Lending Facility (SLF) to secure funds for operation.
A standing lending facility is a means by which central banks offer short-term liquidity to commercial banks experiencing temporary funding shortfalls.
The facilities provide opportunities to invest excess funds overnight and balance out any shortages in the system at the close of each business day.
Source: Getty Images
According to data obtained from the CBN, DMBs borrowing from the central bank's SLF rose to N240.57 billion as of Wednesday, April 11, 2023.
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This amount is 204.71% higher than the N78.95 billion loan that the DMBs borrowed as of December 12, 2022.
Why are banks borrowing
The rise in SLF borrowing may have been due to the currency redesign policy, which led to cash shortages as bank customers kept money at home instead of depositing it in banks.
The CBN, on October 26, 2022, declared that it would revamp and launch new N200, N500, and N1,000 notes into circulation from December 15, 2022, while ordering commercial banks to return the old denominations.
The apex bank's mopping up of old notes deposited in banks contributed to the liquidity challenges.
Commercial banks need cash to run their operations, from paying customers to issuing loans, and investments, among several other activities.
Expert speaks
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, attributed the frequent visits of banks to the CBN lending window to the strict monetary policy environment.
His words:
"When things are not going particularly well, if banks' books are not so healthy, they can rely on the CBN as a backup plan. If they face short-term liquidity issues, they can also turn to the CBN, there is no need to be overly concerned about it.
CBN to close millions of bank accounts in Access, UBA, Zenith, and others
Meanwhile, in another report, Legit.ng revealed that CBN plans to close bank accounts without BVN to clean up the sector and reduce fraud.
BVN is a unique identifier capturing biometric data used to verify customer identities and prevent fraud.
There are 24 commercial banks operating in Nigeria, including Access, UBA, Zenith, and other financial institutions, that require BVN.
Source: Legit.ng
