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Liquidity Crunch worsens as, Bank Borrowing from CBN Hits N4.5trn

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While the CBN lends money to banks through the SLF at an interest rate of 100 basis points above the Monetary Policy Rate currently at 14 per cent, it also lends money to banks through Repurchase Arrangement (Repo).

In the month under review, the CBN financial data shows that banks borrowing through the SLF dropped by 24.37 per cent MoM to N1.46tn in July, from N1.93tn in June, while borrowing through Repo arrangement rose sharply in July by 86.1 per cent MoM to N3.07tn from N1.65tn in June 2022.

Experts have however expressed that the money market is getting tighter due to macro-economy headwinds.

The Vice President, Highcap Securities Limited, Mr. David Adnori, expressed uncertainty over the nation’s economy, saying the hike in interest rate and rising inflation rates had forced many banks to the CBN lending window especially in July.

He said, “Banks without liquidity might have trigger the high borrowing from the CBN. Besides, economic uncertainty has started to surface following the 2023 general elections.”

Also, speaking, the Chief Executive Officer, Cowry Asset Management Limited, Johnson Chukwu, linked the development to low liquidity on the part of the banks.

He said, ““The level of involvement of FAAC was not quite high in that month, there was no major inflow into the financial system and in the same month of July, there was a major outflow including the N180bn Dangote loan.

 

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