According to recent findings from the Central Bank of Nigeria’s financial data, banks’ borrowings from the apex bank’s Standing Lending Facility (SLF) experienced a substantial year-on-year increase.
In the first quarter of 2023 (Q1’23), these borrowings rose by an astonishing 464% to reach N4.95 trillion, compared to N877 billion during the corresponding period in 2022 (Q1’22).
The data reveals an interesting trend in banks’ borrowings from the apex bank. While there was a decline of 14% in February, the figures skyrocketed by 775% in March, amounting to N3.97 trillion.
However, there was a subsequent decline of 45.8% in April, bringing the total borrowings down to N2.15 trillion.
In a different aspect of the data, it was observed that banks’ deposits in the Central Bank of Nigeria’s Standing Deposit Facility (SDF) experienced a year-on-year increase of 26%.
In Q1’23, these deposits amounted to N1.72 trillion, compared to N1.36 trillion in Q1’22.
The breakdown of monthly figures reveals that banks’ deposits in the SDF were N584.79 billion in January, which increased by 14% to N668.86 billion in February.
However, there was a significant decline of 29.5% in March, resulting in deposits amounting to N471.4 billion.
These findings highlight a cash crunch in the money market, as the upward trend in deposits witnessed in February began to decline in March and continued into April.
The surge in banks’ borrowings from the SLF contradicts the intention behind the Central Bank of Nigeria’s cashless policy measure, which aimed to mop up excess cash in the banking system.
Notably, during this period, the CBN redesigned and set a deadline for the old N200, N500, and N1,000 notes to cease being legal tender.
It’s worth mentioning that Nigerians responded to the initial deadline by depositing N1.81 trillion into the banking system in January, according to the CBN Money and Credit data for that month.
As a result, the amount of Currency Outside Banks (CoB) experienced a significant month-on-month decline of 70%, falling to N788.9 billion in January 2023 from N2.6 trillion in December 2022.
However, following the Supreme Court’s extension of the validity of the old N200, N500, and N1,000 notes until December 31, 2023, CoB has been on the rise. In February, CoB reached N843 billion, increasing further to N1.44 trillion in March, and continuing its upward trajectory to N2.07 trillion in April.
