Deposit Money Banks (DMBs) in the country borrowed the sum of N1.4 trillion from the Central Bank of Nigeria (CBN) through the Standing Lending Facility (SLF) window in July this year, the apex bank has disclosed.
The CBN stated this in its Economic Report for July 2019 released at the weekend, adding that it granted total Standing Deposit Facility (SDF) of N1.2 trillion to DMBs during the same period.
While the SLF is a window through which DMBs borrow funds from the CBN to enable them to meet their short-term cash needs, the SDF provides a window for the lenders to place their surplus cash with the regulator with interest.
According to the banking watchdog, DMBs made more visits to its SLF window in July.
It stated: “The trend at the CBN standing facilities window showed more patronage at the Standing Lending Facility (SLF) window. Applicable rates for the SLF and Standing Deposit Facility (SDF) remained at 15.50 per cent and 8.50 per cent, respectively.
“The total SLF granted during the review period was N1,372.95 billion (inclusive of Intra-day Lending Facility (ILF) converted to overnight repo). Daily average was N68.65 billion in the 20 transaction days in July 2019. Total interest earned was N994.80 billion.
“The total SDF granted during the review period was N1,165.82 billion with a daily average of N1.30 billion in the 19 transaction days. Daily request ranged from N9.00 billion to N154.30 billion. Cost incurred on SDF in the month stood at N0.35 billion.”
New Telegraph’s analysis of data obtained from the CBN shows that DMBs borrowed N11 trillion from the CBN through the SLF in the first five months of this year.
Specifically, a review of the apex bank’s economic report for Q1 2019 as well as its economic reports for the months of January, February, April and May 2019, indicate that while DMBs borrowed N11.02 trillion through the SLF window, the total SDF granted them by the CBN during the period amounted to N5.7 trillion.
The CBN has not released its economic report for the month of June. However, when figures obtained from its July 2019 economic report are added to those from the reports for the first five months of this year, they show that for the six months under review, DMBs borrowed a total of N12.42 trillion from the banking sector regulator through the SLF while the total SDF granted them during the period amounted to N6.9 trillion.
Analysts point out that the DMBs would continue to be frequent visitors at the SLF window for as long as the CBN continues with its tight monetary policy stance. In fact, with softening oil prices leading to a decline in the nation’s external reserves in recent weeks, the general prediction is that the CBN could adopt further tightening measures as a way of attracting foreign portfolio capital investors.
However, while DMBs’ visits to the SLF window are heading north, there are indications that lenders’ placements at the SDF window are heading south. Indeed, compared with the data in the economic report for May, total SDF granted by the CBN in July declined.
In its May 2019 economic report, the CBN had stated that: “The total SDF granted during the review period was N1,813.90 billion, with a daily average of N100.77 billion in the 18 transaction days. Daily request ranged from N24.75 billion to N144.10 billion. Cost incurred on SDF in the month stood at N0.59 billion.”
In its July report, however, the apex bank disclosed that: “The total SDF granted during the review period was N1,165.82 billion with a daily average of N1.30 billion in the 19 transaction days. Daily request ranged from N9.00 billion to N154.30 billion. Cost incurred on SDF in the month stood at N0.35 billion.”
Analysts attribute the drop in SDF placements by DMBs in July partly to the implementation of the CBN’s decision to peg DMBs’ remunerable daily placements at the SDF at a maximum amount of N2 billion and that it would not pay interest on any deposit by a lender that is above the N2 billion.
The decision, along with an earlier CBN directive mandating DMBs to give out a minimum of 60 per cent of their deposits as loans with effect from September 30, 2019 or face sanctions, were part of fresh measures recently unveiled by the regulator to help boost economic growth by unlocking credit, especially to the real sector.
Meanwhile, according to the economic report for July 2019, DMBs’ credit to the domestic economy increased by 0.6 per cent to N21,073.7 billion at end-June 2019, compared with the level at the end of the preceding month.
The report further stated that: “Total assets and liabilities of the banks amounted to N39,623.4 billion at end-June 2019, showing a 0.2 per cent increase, compared with the level at the end of the preceding month.
“Funds were sourced, mainly, from foreign liabilities, mobilisation of time, savings and foreign currency deposits and reduction in claims on Central Bank. The funds were used mainly, to acquire foreign assets, shore up capital accounts and pay off demand deposits.”