A report by Afrinvest Research reveals that Nigerian banks and discount houses borrowed N3 trillion from the Central Bank of Nigeria (CBN) through the Standing Lending Facility (SLF) within a week. Conversely, they deposited N493.6 billion through the Standing Deposit Facility (SDF) during the same period.
The surge in borrowing resulted in a 4.7% increase in system liquidity, now standing at N712.3 billion. The CBN uses SLF and SDF to manage money supply and liquidity in the financial system.
The CBN recently issued a directive to boost lending to the real sector, signaling a shift towards a contractionary monetary policy approach. The central bank also lifted the suspension on SLF for authorized dealers.
Afrinvest analysts believe the increased demand for short-term liquidity reflects the need for banks and discount houses to address temporary liquidity shortages or seize short-term financial opportunities. Despite the liquidity boost, inter-bank lending rates displayed mixed results.
Economist Segun Ogundare notes that frequent borrowing from the central bank could indicate deeper issues, warning of potential financial challenges for banks. Broker David Adonri highlights that banks typically resort to borrowing from SLF to address temporary liquidity shortages or seize short-term financial opportunities.
