N5.5trn fiscal deficit report wrong, CBN says

By Babajide Komolafe

Banks’  borrowings from the Central Bank of Nigeria, CBN, rose by 233 per cent, year-on-year, to N26.9 trillion in 2021 reflecting  increased  reliance on the apex bank to cope with the intense scarcity of funds which prevailed in the interbank money market for most part of last year.

The CBN has two short term lending windows for banks namely the Standing Lending Facility (SLF) and Repo (Repurchase) lending.

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While the CBN lends money to banks through the SLF at interest rate of 100 basis points (bpts) above the Monetary Policy Rate (MPR), it also lends money to banks through Repo arrangement, which involves the purchase of  banks’ securities with the agreement to sell back at  a specific date and  usually for a higher price.

On the other hand, the CBN accepts deposits from banks through its Standing Deposit Facility (SDF).

Data from the CBN showed that banks’ borrowing through  Repo arrangement rose sharply last year by 1,602 per cent to N13.938 trillion from N819 billion in 2020. Most of the borrowing via Repo occurred in the second  half of the year (H2’21) when banks’ borrowed N7.37  trillion, up by 12 per cent from N6.57 trillion in the first half of the year (H1’21).

Similarly, banks’ borrowing through the CBN’s SLF rose sharply by  79 per cent, YoY in 2021 to N13 trillion from N7.25 trillion in 2020. Financial Vanguard analysis however showed that borrowings through the SLF fell by 57 per cent in H2’21 to N3.9 trillion from H9.04 trillion in H1’21.

Consequently, banks’ borrowing from the apex bank through the SLF and Repo rose by 233 per cent,  YoY,  to N26.9 trillion in 2021 from N8.1 trillion in 2020. 

Similarly, banks’ deposit of idle cash through the CBN’s SDF rose 273 per cent, YoY, to 3.1 trillion in 2021 from N819.3 billion in 2020. Further analysis however showed that banks’  deposits through the SDF fell by 23 per cent in H2’21 to N1.33 trillion from  N1.73 trillion in H1’21. 

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