The Central Bank of Nigeria (CBN) lend total sum of N870.9 billion to Deposit Money Banks (DMBs) operating in the country in just one week, which was higher than N574bn in previous week.
The latest figure showed that commercial banks borrowing from the Apex lender rose by 52 per cent in one week, attributable to liquidity scarcity and banks demand for funds to participate in the special foreign exchange (FX) auctions conducted by the apex banking regulating body.
However, Daily Times checks revealed that Standing Lending Facility (SLF) showed that, commercial Bank in 18 days of November had borrowed N2.77 trn with an average amount of N154bn.
The highest and lowest amount commercial banks have borrowed so far this month was N260bn and N108bn, respectively. Banks use the CBN’s SLF to support their liquidity shortfalls and meet trading obligations on short term basis.
Finance expert hinted our correspondent that CBN’s lending to banks has increased of recent on the heels of illiquidity in the economy. On the trigged borrowing of commercial banks from CBN, the Managing Director, Highcap Securities Limited, Mr. David Adnori, said, “When banks go the CBN, it means they have some projects they wanted to finance but the funds are not enough. So, they access funds from the CBN through the SLF.
“When banks had undergone that project in days, they will start paying CBN principal and interest – that is how CBN makes it own income. “The SLF is not meant to finance banks’ foreign exchange request.
Banks are suppose to request foreign exchange on behalf of their customers but if banks are borrowing from CBN for themselves through the SLF, then that might lead to round tripping.
“With the increased borrowing in SLF, I want to think it is time CBN organized a transparent and competitive foreign exchange market where the true state of Naira will be determined.
“The CBN is still doing the allocation which means Nigeria economy is yet to have a fair competitive market- it is the duty of the market forces to determine the price based on supply and demand.
“The CBN weekly allocation of foreign exchange is unfair. The market is not competitive. CBN still allocate foreign exchange to Bureau de Change (BDC) operators in a country manufacturers need foreign exchange allocation,” he explained.
