Bank borrowing from CBN rises 260% to N21.87tn

Deposit Money Banks borrowed the sum of N21.87tn from the Central Bank of Nigeria via the Standing Lending Facility window and Repurchase Lending platform in 2020, according to the CBN financial data.

This represents a 260 per cent increase when compared to the N5.744tn recorded via the same windows in 2022. It, however, represents a 19.3 per cent decrease when compared to the N27.08tn the banks borrowed from the apex bank in 2021.

The apex bank has two short-term lending windows for banks and merchant banks namely-Standing Lending Facility (SLF) and Repurchase (Repo) lending.

While the CBN lends money to banks and merchant banks through the SLF at interest rate of 100 basis points above the Monetary Policy Rate (MPR), it also lends money to banks through Repo arrangement, which involves the purchase of banks’ securities with the agreement to sell back at a specific date and usually for a higher price.

The financial data by the CBN revealed that borrowing by banks and merchant banks through the SLF in 2022 dropped by 14.25 per cent to N11.15tn as against N13.01tn in 2021.

The month-on-month breakdown of SLF revealed that the DMBs and merchant banks in January 2022 borrowed N313.48bn from the CBN. It, however, dropped to N186.48bn in February.

The financial data by apex bank showed that SLF data in March stood at N377.13bn and increased further by 62.4 per cent M-o-M to N612.43bn in April 2022.

For May, the CBN reported N897.05bn, after which the borrowing increased significantly to N1.93tn in June.

However, the financial data by apex bank showed N1.46tn and N1.19tn for July and August 2022, respectively.

In addition, the DMBs and merchant banks had borrowed N836.5bn in September; N464.07bn in October; N1.56tn in November and N1.33tn in December 2022.

Consequently, borrowing by the DMBs and merchant banks through the CBN’s Repo declined by 24 per cent to N10.7tn in 2022 from N14.07tn disclosed by financial data in 2021.

For Repo, the data by the CBN revealed N968.8bn in January but it dropped to N480.35bn in February. With nine Repo activities in March, a sum of N343.48bn was reported. It however increased to N474.83bn in April.

For other months, the CBN data showed that N870.32bn was borrowed in May; N1.65tn in June; N3.07tn in July; N1.62tn in August; N1.197tn in September and N46.32bn in October.

The financial data revealed no Repo transactions for November and December, 2022.

Analysts have attributed the decline to tight liquidity conditions in the banking system, as the apex bank stimulates its monetary ratios to tackle increasing inflation.

Aside the SLF and Repo, the CBN accepts deposits from banks through its Standing Deposit Facility and pays an interest rate of 700 basis points below the MPR that currently stands at 16.5 per cent.

Findings by The PUNCH revealed that banks and merchant banks deposited N3.24tn with CBN in 2022, an increase of 6.65 per cent from N3.03tn deposited in 2021.

CBN action

The CBN had in 2016 sacked the board and management of defunct Skye Bank for persistently failing to “meet minimum thresholds in critical prudential and adequacy ratios, which has culminated in the bank’s permanent presence at the CBN lending window.”

It also stated that “In particular, Skye Bank’s liquidity and non-performing loan ratios have been below and above the required thresholds, respectively, for quite a while.”

Analysts react

Reacting to the CBN data, economist and Chief Executive Officer, Cowry Asset Management Limited, Johnson Chukwu, said there were increases in bank borrowing from the CBN in 2021 and 2022 due to higher levels of business activities. However, he said it was difficult to ascertain if the increased lending were as a result of the liquidity crisis.

He, however, said that the CBN policies in 2021 and 2022 especially those that affected Cash Reserve Ratio and Loan to Deposit Ratio might have affected the activities of banks especially as regarding going to the central bank’s lending window.

Chukwu said, “It is not straight forward issue. So many factors would have been responsible for the banks’ decision to go to the CBN lending window. You had the CBN policies of 30 per cent Cash Reserve Ratio, you also had the 75 per cent Loan to Deposit Ratio at that time. The interplay of these policies and other factors would have been responsible for the banks’ continuous presence at the CBN window in order to meet their short-term cash needs.”

New notes

Meanwhile, Nigerians who reject or deface the new naira notes may be at risk of a N50,000 fine or six-month imprisonment, The PUNCH has learnt.

The CBN Act of 2007, a copy of which was obtained by our correspondent, made it a crime for anyone to reject, deface, or counterfeit the naira notes.

According to Section 20(5) of the CBN Act, “A person who refuses to accept the naira as a means of payment is guilty of an offence and liable on conviction to a fine of N50,000 or 6 months imprisonment.”

Section 21 added, “(1)A person who tampers with a coin or note with or trading in issued by the bank is guilty of an offence and shall on notes and coins imprisonment for a term not less than six months or to a fine not less than N50,000 or to both such fine and imprisonment.

“(2) A coin or note shall be deemed to have been tampered with if the coin or note has been impaired, diminished or lightened otherwise than by fair wear and tear or has been defaced by stumping, engraving, mutilating, piercing, stapling, writing, tearing, soiling, squeezing or any other form of deliberate and willful abuse whether the coin or note has or has not been thereby diminished or lightened.”

The crime of counterfeiting, however, attracts not less than five years of imprisonment.

In an earlier report by The PUNCH, it was disclosed that some of the bank customers refused to collect the new notes for over-the-counter payments.

Confirming the situation, a bank teller in Ogba, Lagos had told one of our correspondents, “Some customers have been rejecting the new naira notes whenever we give them; they said the new notes would not be collected from them in the market; they prefer the old notes.”

During a recent sensitisation exercise in Abeokuta, the CBN’s Head of the Abeokuta branch, Wahab Oseni, affirmed that the rejection of the naira is a crime, according to news reports.

The Nigerian Security Printing and Minting Plc recently urged Nigerians to stop experimenting with the new naira.

The minting firm highlighted some features of the new naira notes in order to sensitise Nigerians who have expressed concern about the quality of the notes.

In a statement signed by the Managing Director of NSPM, Ahmed Halilu, the company stressed the need to enlighten Nigerians on the features of the new naira.