Shocker: Banks borrow N3.03trn from CBN in 22 days – moneyamebo

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  • Commercial banks in Nigeria borrowed a whopping N3.03 trillion from the Central Bank of Nigeria
  • Data from the CBN website says the banks’ borrowings happened within 22 days in September
  • Banks’ borrowings from the Central Bank of Nigeria surged in September from N322.97 billion in August to N3.03 trillion, an increase of 835%.
  • The borrowings are indicative of tight liquidity in the banking sector and a sign of non-performing loans

In an unprecedented move that has raised concerns about the financial stability of Nigeria’s banking sector, commercial banks in the country have collectively borrowed a staggering N3.03 trillion from the Central Bank of Nigeria (CBN) in the span of just 22 days.

The borrowing spree, which began on September 1, 2023, and continued through September 22, 2023, highlights growing liquidity challenges faced by Nigerian banks. Experts attribute this sudden surge in borrowing to a combination of factors, including a tightening of global credit markets, increased regulatory pressures, and the economic fallout from the ongoing global pandemic.

The N3.03 trillion borrowed represents a substantial increase in banks’ dependence on the central bank’s intervention facility. This amount surpasses the N2.8 trillion borrowed over the course of the entire year in 2022, indicating a significant escalation in financial strain within the sector.

Market analysts suggest that these massive borrowings could strain the CBN’s capacity to provide further support to the banking industry, potentially leading to a credit squeeze that might impact lending to other sectors of the economy.

 

The impact of these unprecedented borrowings on Nigeria’s banking sector and overall economic stability remains uncertain. Stakeholders are closely watching as authorities take measures to address the liquidity challenges and prevent a financial crisis.

As the situation unfolds, both the government and financial institutions are expected to work collaboratively to restore confidence in the banking sector and ensure the resilience of Nigeria’s financial system in the face of these mounting challenges.

 

CBN monetary policies put banks under pressure

Experts moneyamebo spoke to believe that the growing SLFs are due to market tightening policies the CBN is using to reduce the level of cash in circulation and the shoring up of the value of the naira.

In the last two years, CBN has undertaken a monetary tightening policies, relying on its cash reserve requirement and loan-to-deposit ratio to mop up billions from commercial banks weekly.

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