Banks in Nigeria have witnessed a significant surge in their borrowings from the Central Bank of Nigeria (CBN), particularly from the Standing Lending Facility (SLF). According to the latest data, these borrowings have risen by a substantial 79% year-on-year, reaching a total of N269.6 billion by the end of September 2023. This notable increase is compared to N150 billion recorded at the end of September 2022.
Quarter-on-quarter insights from the CBN’s financial data spanning January through September 2023 reveal intriguing trends. Banks’ borrowing from the apex bank reached N558.5 billion by the end of the first quarter of 2023 (Q1’23). However, this figure saw a significant decrease, plummeting by 90% to N55.3 billion by the end of the second quarter (Q2’23), indicating a noticeable easing of financial system liquidity during that period.
Remarkably, the third quarter (Q3’23) saw a remarkable resurgence in banks’ borrowings from SLF, experiencing a staggering 387% leap, culminating in a total of N269.6 billion.
Despite this surge, the Central Bank of Nigeria remains vigilant about the financial soundness of the banking system. In its July 2023 Monetary Policy Committee (MPC) meeting communiqué, the apex bank reported that financial soundness indicators remained stable and robust. Notable figures include a Capital Adequacy Ratio (CAR) of 11.2%, a Non-Performing Loans (NPLs) ratio of 4.1%, and a Liquidity Ratio (LR) of 48.4% as of the end of June 2023.
The upswing in banks’ borrowings year-on-year from the SLF reflects heightened borrowings from both the government and the private sector.Â
According to CBN’s Money and Credit Statistics data for August 2023, banks’ credit to the government increased month-on-month by 0.62%, climbing to N32.3 trillion from N32.5 trillion in July. Similarly, banks’ credit to the private sector grew by 1.1% month-on-month, reaching N54.7 trillion from N54.1 trillion.
These dynamics led to a notable 0.92% month-on-month increase in net domestic credit, culminating in N87.3 trillion in August compared to N86.5 trillion in July.
Furthermore, the financial data highlights an intriguing trend in banks’ deposits in the apex bank’s Standing Deposit Facility (SDF). These deposits witnessed a substantial year-on-year surge of 68%, reaching N40.8 billion by the end of September 2023, up from N12.7 billion in September 2022.
Quarter-on-quarter analysis unveils a gradual ascent in banks’ deposits in CBN’s SDF. At the end of Q1’23, these deposits stood at N11.2 billion, surging by a remarkable 256% to N39.9 billion by the end of Q2’23, and finally reaching N40.7 billion by the close of Q3’23. These figures signify the evolving financial landscape and the dynamic nature of banking operations in Nigeria.
SOURCE: VANGUARD
