According to financial data released by the Central Bank of Nigeria (CBN), banks’ borrowing from the CBN’s Standing Lending Facility (SLF) decreased by 76.4% month-on-month to N4.04 trillion in August, compared to N17.12 trillion in July.
Conversely, banks’ deposits in CBN’s Standing Deposit Facility (SDF) increased by 270.7% to reach N8.12 trillion from N2.19 trillion in July. This shows that banks are hoarding excess liquidity, which remains unutilized due to rising borrowing rates following the recent raise of the Monetary Policy Rate (MPR).
To discourage banks from holding excess liquidity while encouraging lending activities, The CBN has been working hard on this front, including after the 296th Monetary Policy Committee (MPC) meeting, when it reviewed the Asymmetric Corridor around the MPR and raised the SLF rate to 31.75%. Besides, the SDF rate was raised to 25.75% for commercial and merchant banks’ deposits below N3 billion and 19% for deposits above N3 billion.
These measures aim to promote a rise in lending activities, where such would support economic growth. The Central Bank of Nigeria’s (CBN) interventions on liquidity regulation are vital aspects aimed at ensuring a stabilized financial system, as well as providing support towards Nigeria’s economic progress.
